Write a memo to the team describing judgment traps

Assignment Help Accounting Basics
Reference no: EM131969284

Assignment

Read the following Case: St. John Corporation

St. John Corporation is not able to service its debts and is unable to secure any significant restructuring arrangements from its primary lenders. As a result, St. John has decided to liquidate the corporation and has submitted a plan for liquidation. The plan has received all necessary approvals, and the liabilities affected by the plan follows:

Accounts payable: Of these accounts, $400,000 is fully secured by claims against inventory with a book value of $4430,000. The inventory was completed at an additional cost of 25,000, it was sold for $480,00, and the secured payables were paid. Another $320,000 of the payables is secured by the remaining inventory which is estimated to have a net realizable value of $200,000. The balance of the payables is unsecured.

Mortgage payable: The mortgage is secured by the manufacturing plant and other current assets with a book value of $130,000. The plant is currently listed for sale with an asking price of $1,800,000. Realistically, it is estimated that the plant could be sold for $1,500,000 before commissions of $90,000. The other current assets securing the mortgage were sold for $100,000.

The audit team for St. John Corporation is planning for the upcoming audit after restructuring of the debt. The restructuring was necessary as economic conditions hampered the client's ability to make scheduled repayments of its debt obligations. The restructured debt agreements included new debt covenants. In auditing the debt obligation in the prior year (before the restructuring), the team established materiality specific to the financial statement debt account materiality.

Scenario:

You are a member of the internal audit team for St. John's Corporation. In planning the audit for the current year, the team plans to use a similar materiality level. While such a conclusion might be appropriate, you would like to caution against possible judgment trap(s) that might the team fall into. Write a memo to the team describing judgment trap(s) might the team fall into as well as which step(s) in the judgment process are most likely affected?

This analysis should be prepared as a Microsoft Word document, and then attached to the unit discussion thread. There is no minimum or maximum in terms of the word count; however, the response should explicitly address all required components of this discussion assignment. The document should be prepared consistent with the APA writing style (6th edition) and reflect higher level cognitive processing (analysis, synthesis, and or evaluation).

Reference no: EM131969284

Questions Cloud

Three of topics that conflict between work and family life : Could someone describe and discuss in detail three of topics that conflict between Work and Family Life, Child Care, Gay and Lesbian Families?
What revenue recognition options are available to zynga : What revenue recognition options are available to Zynga? Has technology changed the way revenue should be recognized?
How do people become addicted : Considering that addiction is not a disease but a compulsive disorder and a product of your environment, how do people become addicted?
Relative contribution of early events in life : What do you think is the relative contribution of early events in life versus experiences in adulthood?
Write a memo to the team describing judgment traps : Write a memo to the team describing judgment trap(s) might the team fall into as well as which step(s) in the judgment process are most likely affected?
What is the controversy surrounding diagnosing children : What is the controversy surrounding diagnosing children? What are the advantages of early diagnosis and what are the disadvantages?
Publicity regarding the negative effects of drug usage : In your opinion, what social and personal factors cause people to use and abuse drugs and alcohol despite all the publicity regarding the negative effects
Characterize the difference between daydreams : How would you characterize the difference between your daydreams and the dreams you have while you're asleep?
Explain the items that affect both the given classifications : Write a 350- to 700-word paper describing the amounts of current and deferred income taxes. Explain the items that affect both these classifications.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd