Reference no: EM131621684

Problem 1 - Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2014. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2009. The client provides you with the information below.

The supplementary information below is also provided.

1. On May 1, 2014, the corporation issued at 95.3, $783,600 of bonds to finance plant expansion. The long-term bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use the straight-line method for discount amortization.

2. The bookkeeper made the following mistakes.

(a) In 2012, the ending inventory was overstated by $184,160. The ending inventories for 2013 and 2014 were correctly computed.

(b) In 2014, accrued wages in the amount of $225,310 were omitted from the balance sheet, and these expenses were not charged on the income statement.

(c) In 2014, a gain of $176,330 (net of tax) on the sale of certain plant assets was credited directly to retained earnings.

3. A major competitor has introduced a line of products that will compete directly with Almaden's primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor's line will be of comparable quality but priced 50% below Almaden's line. The competitor announced its new line on January 14, 2015. Almaden indicates that the company will meet the lower prices that are high enough to cover variable manufacturing and selling expenses, but permit recovery of only a portion of fixed costs.

4. You learned on January 28, 2015, prior to completion of the audit, of heavy damage because of a recent fire to one of Almaden's two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail.

Analyze the above information to prepare a corrected balance sheet for Almaden in accordance with proper accounting and reporting principles. Prepare a description of any notes that might need to be prepared. The books are closed and adjustments to income are to be made through retained earnings.

Problem 2 - Cineplex Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2015.

Sales of segments B and C included intersegment sales of $24,610 and $101,770, respectively.

(a) Determine which of the segments are reportable based on the:

(1) Revenue test.

(2) Operating profit (loss) test.

(3) Identifiable assets test.

(b) Prepare the necessary disclosures required by GAAP.

Problem 3 - The income statement of Vince Gill Company is shown below.

Additional information:

1. Accounts receivable decreased $310,140 during the year.

2. Prepaid expenses increased $172,300 during the year.

3. Accounts payable to suppliers of merchandise decreased $277,480 during the year.

4. Accrued expenses payable decreased $129,500 during the year.

5. Administrative expenses include depreciation expense of $69,330.

Prepare the operating activities section of the statement of cash flows using the direct method.

Problem 4 - The accounts below appear in the ledger of Anita Baker Company.

From the postings in the accounts above, indicate how the information is reported on a statement of cash flows by preparing a partial statement of cash flows using the indirect method. The loss on sale of equipment (November 15) was $5,230.

Problem 5 - The comparative balance sheets for Hinckley Corporation show the following information.

Additional data related to 2014 are as follows.

1. Equipment that had cost $12,820 and was 40% depreciated at time of disposal was sold for $2,540.

2. $10,280 of the long-term note payable was paid by issuing common stock.

3. Cash dividends paid were $4,340.

4. On January 1, 2014, the building was completely destroyed by a flood. Insurance proceeds on the building were $32,270 (net of $2,600 taxes).

5. Investments (available-for-sale) were sold at $1,300 above their cost. The company has made similar sales and investments in the past.

6. Cash was paid for the acquisition of equipment.

7. A long-term note for $17,010 was issued for the acquisition of equipment.

8. Interest of $2,120 and income taxes of $8,280 were paid in cash.

Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country.