(ii) Receivables, showing separately the deduction of the allowance for receivables.

13 At 1 January 2005 a company had an allowance for receivables of $18,000

At 31 December 2005 the company’s trade receivables were $458,000.

It was decided:

(a) To write off debts totalling $28,000 as irrecoverable;

(b) To adjust the allowance for receivables to the equivalent of 5% of the remaining receivables based on past

experience.

What figure should appear in the company’s income statement for the total of debts written off as irrecoverable

and the movement in the allowance for receivables for the year ended 31 December 2005?

A $49,500

B $31,500

C $32,900

D $50,900

(b) Using sensitivity analysis, estimate by what percentage each of the under-mentioned items, taken separately,

would need to change before the recommendation in (a) above is varied:

(i) Initial outlay;

(ii) Annual contribution. (4 marks)

He actually enjoys his new hair style. and likes _______ to everybody.

A、showing up

B、showing off

C、showing out

D、showing of

On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the ( )

A. Uncollectible accounts expense for the year

B. total of the accounts receivables written-off during the year

C. total estimated uncollectible accounts as of the end of the year

D. sum of all accounts that are past due.

Allowance for Doubtful Accounts is a liability account.()

You are the audit manager of Chestnut & Co and are reviewing the key issues identified in the files of two audit clients.

Palm Industries Co (Palm)

Palm’s year end was 31 March 2015 and the draft financial statements show revenue of $28·2 million, receivables of $5·6 million and profit before tax of $4·8 million. The fieldwork stage for this audit has been completed.

A customer of Palm owed an amount of $350,000 at the year end. Testing of receivables in April highlighted that no amounts had been paid to Palm from this customer as they were disputing the quality of certain goods received from Palm. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance.

Ash Trading Co (Ash)

Ash is a new client of Chestnut & Co, its year end was 31 January 2015 and the firm was only appointed auditors in February 2015, as the previous auditors were suddenly unable to undertake the audit. The fieldwork stage for this audit is currently ongoing.

The inventory count at Ash’s warehouse was undertaken on 31 January 2015 and was overseen by the company’s internal audit department. Neither Chestnut & Co nor the previous auditors attended the count. Detailed inventory records were maintained but it was not possible to undertake another full inventory count subsequent to the year end.

The draft financial statements show a profit before tax of $2·4 million, revenue of $10·1 million and inventory of $510,000.

Required:

For each of the two issues:

(i) Discuss the issue, including an assessment of whether it is material;

(ii) Recommend ONE procedure the audit team should undertake to try to resolve the issue; and

(iii) Describe the impact on the audit report if the issue remains UNRESOLVED.

Notes:

1 The total marks will be split equally between each of the two issues.

2 Audit report extracts are NOT required.

2 The draft financial statements of Rampion, a limited liability company, for the year ended 31 December 2005

included the following figures:

$

Profit 684,000

Closing inventory 116,800

Trade receivables 248,000

Allowance for receivables 10,000

No adjustments have yet been made for the following matters:

(1) The company’s inventory count was carried out on 3 January 2006 leading to the figure shown above. Sales

between the close of business on 31 December 2005 and the inventory count totalled $36,000. There were no

deliveries from suppliers in that period. The company fixes selling prices to produce a 40% gross profit on sales.

The $36,000 sales were included in the sales records in January 2006.

(2) $10,000 of goods supplied on sale or return terms in December 2005 have been included as sales and

receivables. They had cost $6,000. On 10 January 2006 the customer returned the goods in good condition.

(3) Goods included in inventory at cost $18,000 were sold in January 2006 for $13,500. Selling expenses were

$500.

(4) $8,000 of trade receivables are to be written off.

(5) The allowance for receivables is to be adjusted to the equivalent of 5% of the trade receivables after allowing for

the above matters, based on past experience.

Required:

(a) Prepare a statement showing the effect of the adjustments on the company’s net profit for the year ended

31 December 2005. (5 marks)

(d) Briefly describe the principal audit work to be performed in respect of the carrying amount of the following

items in the balance sheet:

(i) trade receivables; and (3 marks)

Under the imputed interest rules, gift loans between a daughter (lender) and her mother (borrower) may result in

I.No imputed interest income recognized by the mother.II.No imputed interest deduction by the daughter.III.Imputed interest income recognized by the daughter.IV.Deduction allowed for imputed interest expense by the mother.()

A.Only statements I, II, and III are correct

B.Only statements I and IV are correct

C.Only statements I and II are correct

D.Only statement III is correct

E.Only statements III and IV are correct

The balance of the allowance for doubtful accounts is added to accounts receivable on the balance sheet.()

do I have more than the duty-free allowance?

Under INSTITUTE TIME CLAUSES-Hulls，Claims payable ______．

A.with deduction new for old

B.without deduction new for old

C.with deduction old for new

D.without deduction old for new