Reference no: EM132005187

Problem 1 - You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2012. The balance sheet accounts at the beginning and end of the year are shown below.

	Dec. 31, 2012	Dec. 31, 2011	Increase or  (Decrease)
Cash	$865,659	$928,270	($62,611)
Accounts receivable	1,462,256	1,099,595	362,661
Inventory	2,310,396	1,900,150	410,246
Prepaid expenses	37,380	24,920	12,460
Investment in subsidiary	344,208	0	344,208
Cash surrender value of life insurance	7,177	5,607	1,570
Machinery	644,805	591,850	52,955
Buildings	1,667,148	1,270,609	396,539
Land	163,538	163,538	0
Patents	214,935	199,360	15,575
Copyrights	124,600	155,750	(31,150)
Bond discount and issue cost	14,024	0	14,024
	$7,856,126	$6,339,649	$1,516,477
Accrued taxes payable	$281,131	$247,955	$33,176
Accounts payable	932,257	872,200	60,057
Dividends payable	218,050	0	218,050
Bonds payable-8%	389,375	0	389,375
Bonds payable-12%	0	311,500	(311,500)
Allowance for doubtful accounts	109,960	124,600	(14,640)
Accumulated depreciation-buildings	1,320,760	1,246,000	74,760
Accumulated depreciation-machinery	538,895	404,950	133,945
Premium on bonds payable	0	7,476	(7,476)
Common stock-no par	3,663,863	4,526,718	(862,855)
Paid-in capital in excess of par-common stock	339,535	0	339,535
Retained earnings-unappropriated	62,300	(1,401,750)	1,464,050
	$7,856,126	$6,339,649	$1,516,477

 

STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2012
January	1, 2012	Balance (deficit)	$(1,401,750)
March	31, 2012	Net income for first quarter of 2012	77,875
April	1, 2012	Transfer from paid-in capital	1,323,875
		Balance	0
December	31, 2012	Net income for last three quarters of 2012	280,350
		Dividend declared-payable January 21, 2013	(218,050)
		Balance	$62,300

Your working papers from the audit contain the following information:

1. On April 1, 2012, the existing deficit was written off against paid-in capital created by reducing the stated value of the no-par stock.

2. On November 1, 2012, 92,204 shares of no-par stock were sold for $800,555. The board of directors voted to regard $5 per share as stated capital.

3. A patent was purchased for $46,725.

4. During the year, machinery that had a cost basis of $51,086 and on which there was accumulated depreciation of $16,198 was sold for $28,035. No other plant assets were sold during the year.

5. The 12%, 20-year bonds were dated and issued on January 2, 2000. Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were retired at 100.9 plus accrued interest on March 31, 2012.

6. The 8%, 40-year bonds were dated January 1, 2012, and were sold on March 31 at 97 plus accrued interest. Interest is payable semiannually on June 30 and December 31. Expense of issuance was $2,613.

7. Alexander Corporation acquired 70% control in Crimson Company on January 2, 2012, for $311,500. The income statement of Crimson Company for 2012 shows a net income of $46,725.

8. Extraordinary repairs to buildings of $22,428 were charged to Accumulated Depreciation-Buildings.

9. Interest paid in 2012 was $32,708 and income taxes paid were $105,910.

From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest.

Problem 2 - LaGreca Company is involved in four separate industries. The following information is available for each of the four industries.

Operating Segment	Total Revenue	Operating Profit (Loss)	Identifiable Assets
W	$105,676	$16,733	$165,300
X	16,398	1,553	82,650
Y	45,550	(2,244)	19,950
Z	14,576	1,208	17,100
	$182,200	$17,250	$285,000

Determine which of the operating segments are reportable based on the:

(a) Revenue test.

(b) Operating profit (loss) test.

(c) Identifiable assets test.