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Question - Issue - The ASX Company Bijou Electronics have reported sales problems over the last few years. Reduction in costing has been difficult due to Covid and the significant levels of imported inventory. All margins have reduced as a result. During this reporting period warranty claims on their strongest performing inventory item, the premium car battery tester, have been increasing. This has resulted in an increase from 7% of sales to 12% of sales. The problem relates to the copper wiring in the handheld tester which overheats and can spark up causing flames. The average cost to repair has risen by over 50% to $300 per warranty. The CEO of the company (your friend whom you went to university with) assured you they are not worried by this cost since each product retails for $2,999. The lenders are still willing to provide loan financing to Bijou as they expect better results next year in a post-Covid world and also this particular company pays a much higher interest rate than their other clients.
Required - Assume you are the audit manager preparing your audit plan:
1) Describe the factors would you consider when allocating staff to the audit?
2) Discuss the audit risks that need to be considered:
i) At the planning stage
ii) During the audit
iii) After the sign-off of the audit report.
3) Identify the main account or groups of accounts that could be impacted and give reasons.
4) Design effective audit procedures that would be included in the audit plan.
Required: Advise Mr. Perry on the purchase he is considering. How should the note payable and the equipment be valued
You want to form a portfolio of two stocks, A and B, and you require an expected return of 12%. What are the proportions of your investment in each stock
If the gift tax rate is 40% and she has never made a gift in excess of $10,000 before this, what amount of gift tax will she pay? What is their net tax savings percentage as a family unit if Sean sells the land?
EASY uses the interest method to amortize bond discount. Determine the carrying value of the Bonds on December 31, 20x7
If a statement of realization shows assets to be realized of $400,000, assets not realized. What is the amount that would be reported for assets realized.
During the current period, the owner withdrew $7,000 for personal use and the net loss was $5,000. What is the net change in the capital account
Jackson Corp. has an operating income of $103,000, average invested assets of $606,000, and a cost of capital of 7%. What is the residual income
Accounts payable $65,000, Accounts receivable $41,000, Capital stock $100,000, Cash $50,000, Dividends $10,000, How much are total assets
Donna does not think she has an income tax problem but would like to discuss her situation with you just to make sure there is no unexpected tax liability.
What three transaction cycles exist in all businesses? - Name the major subsystems of the expenditure cycle. -Identify and distinguish between the physical and financial components of the expenditure cycle.
Calculate the amount of book value per share for common stock and summarize briefly what that figure means in relation to the current market value of the stock
The Ohio Company performed services for a customer in the amount of $5,000 on 12/18/16, but has not had time to send a bill. What is the adjusting entry?
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