Pat Colt is auditing the financial statements of Manning Company. The following is a summary of the uncorrected misstatements that Colt has Identified during the past three years. These misstatements are Immaterial and have related to Isolated matters. In this summary, parentheses Imply that the misstatements would have reduced balances if they had been corrected (e.g., In 2020, the misstatements would have reduced net Income by $82,500, assets by $100,000, liabilities by $17,500, and equity by $82,500 if corrected). Year 2020 2021 2022 Effect on Net Income $ (82,500) (22,000) 30,000 Effect on Assets $ (100,000) (25,500) 30,000 Effect on Liabilities $ (17,500) (3,500) 0 Effect on Equity $ (82,500) (22,000) 30,000 During the most recent audit, Colt concluded that expenses totaling $130,000 were recognized in January 2024 (when Manning pald them) but should have been recognized in 2023. Required: a. What is the dollar Impact of the misstatement Identified in 2023 on each of the following (assume a 21% tax rate for Manning)? Note: Enter amounts to be deducted with a minus sign.

Pat Colt is auditing the financial statements of Manning Company. The following is a summary of the uncorrected misstatements that Colt has Identified during the past three years. These misstatements are Immaterial and have related to Isolated matters. In this summary, parentheses Imply that the misstatements would have reduced balances if they had been corrected (e.g., In 2020, the misstatements would have reduced net Income by $82,500, assets by $100,000, liabilities by $17,500, and equity by $82,500 if corrected). Year 2020 2021 2022 Effect on Net Income $ (82,500) (22,000) 30,000 Effect on Assets $ (100,000) (25,500) 30,000 Effect on Liabilities $ (17,500) (3,500) 0 Effect on Equity $ (82,500) (22,000) 30,000 During the most recent audit, Colt concluded that expenses totaling $130,000 were recognized in January 2024 (when Manning pald them) but should have been recognized in 2023. Required: a. What is the dollar Impact of the misstatement Identified in 2023 on each of the following (assume a 21% tax rate for Manning)? Note: Enter amounts to be deducted with a minus sign.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity

Section: Chapter Questions

Problem 5C: It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019...

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Pat Colt is auditing the financial statements of Manning Company. The following is a summary of the uncorrected misstatements that Colt has identified during the past three years. These misstatements are immaterial and have related to isolated matters. In this summary, parentheses imply that the misstatements would have reduced balances if they had been corrected (e.g., in 2020, the misstatements would have reduced net income by $82,500, assets by $100,000, liabilities by $17,500, and equity by $82,500 if corrected). Year 2020 2021 2022 Effect on Net Income $ (82,500) (22,000) 30,000 Effect on Assets $ (100,000) (25,500) 30,000 Effect on Liabilities $ (17,500) (3,500) 0 During the most recent audit, Colt concluded that expenses totaling $130,000 were recognized in January 2024 (when Manning paid them) but should have been recognized in 2023. Required: a. What is the dollar impact of the misstatement identified in 2023 on each of the following (assume a 21% tax rate for Manning)? Note:…
Aaron Rivers, CPA, is auditing the financial statements of Charger Company, a client for the past five years. During past audits of Charger, Rivers identified some immaterial misstatements (most of which relate to isolated matters and do not have common characteristics). A summary of these misstatements follows. (To illustrate, in 2015, the misstatements would have reduced net income by $13,200 if corrected:) Effect on Equity $ (13,200) 5,000 (9,250) (2,000) 1,000 Effect on Net Effect on Effect on Income $ (13,200) 5,000 (9,250) (2,000) 1,000 Year Assets Liabilities $ (20,000) 12,000 (11,000) (5,500) 1,000 $ (6,800) 7,000 (1,750) (3,500) 2015 2016 2017 2018 2019 During the most recent audit, Rivers concluded that service revenue totaling $11,000 was recognized as of December 31, 2020 and it did not meet the criteria for recognition until 2021. When Rivers discussed this issue with Chris Turner, Charger Company's chief financial officer, Turner asked Rivers about the performance…
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Uncorrected Misstatements and Performance Materiality. Aaron Rivers, CPA, is auditing the financial statements of Charger Company, a client for the past five years. During past audits of Charger, Rivers identified some immaterial misstatements (most of which relate to isolated matters and do not have common characteristics). A summary of these misstatements follows. (To illustrate, in 2012, the misstatements would have reduced net income by $13,200 if corrected:) Check the below image for misstatements - During the most recent audit, Rivers concluded that sales totaling $11,000 were recognized as of December 31, 2017, that did not meet the criteria for recognition until 2018. When Rivers discussed these sales with Chris Turner, Charger Company’s chief financial officer, Turner asked Rivers about the performance materiality level used in the audit, which was $25,000. Upon learning of this, Turner remarked, “Then there’s no need toworry . . . it’s not a material amount. Why should we…
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Uncorrected Misstatements and Performance Materiality. Pat Colt is auditing the financial statements of Manning Company. The following is a summary of the uncorrected misstatements that Colt has identified during the past three years. These misstatements are immaterial and have related to isolated matters. In this summary, parentheses imply that the misstatements would have reduced balances if they had been corrected (e.g., in 2014, the misstatements would have reduced net income by $82,500, assets by $100,000, liabilities by $17,500, and equity by $82,500 if corrected). Check the below image for misstatements- During the most recent audit, Colt concluded that expenses totaling $130,000 were recognized in January 2018 (when Manning paid them) but should have been recognized in 2017.Required:a. How does the misstatement identified in 2017 affect net income, assets, liabilities, and equity? (Assume a 35 percent tax rate for Manning.)b. Describe the rollover method of evaluating…
Upon inspection of the records of Eisenhower Company in connection to its financial statement audit for the year ended December 31, 2022, the following errors were revealed: A fire insurance premium of P 40,000 was paid and charged to insurance expense in 2021. This covers one year from April 1, 2021. Inventory at December 31, 2020 was understated by P 80,000. Inventory at December 31, 2021 was understated by P 120,000. • The year 2021 last quarter taxes amounting to P 60,000 were paid on January 19, 2022 and charged to expense account of 2022. A cash advance of P 100,000 in payment of goods to be delivered in January 2022 was received on December 15, 2021 and credited to Sales. • The gross profit on sales is 40%. The net income for the year ended December 31, 2021 before any adjustments is P 1,550,000. O 1,550,000 O 1,200,000 O 1.440,000 O 1.600,000
You are reviewing the results of the Firestone audit. These are the details of the summay of identified misstatements: • Allowance for Doubtful Accounts: $60,000 misstatement (over) • Sales Revenue: $10,000 misstatement (under) • Total identified misstatements: $50,000 (impact on Assets, pre-tax income, and equity) • Performance materiality was set at $60,000 REQUIRED: a) If overall materaility for the audit was set at $30,000, what type of audit report would be issued? Why? b) If overall materiality for the audit was set at $75,000, what type of audit report would be issued? Why?
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