1-1 PBC 2014 2013 Oceanview Marine Company Balance Sheet December 31, 2015 ASSETS Current Assets 2015 Cash $1,320,096 Accounts receivable: net (Notes 2 and 5) 1,646,046 Inventories (Notes 1(a), 3, and 5) 13,524,349 Prepaid expenses 17,720 Deposits 7,916 Total Current Assets 16,516,127 Property, Plant, and Equipment (Notes 1(b) and 4) At cost, less accumulated depreciation 596,517 TOTAL ASSETS $17,112,644 $1,089,978 $1,200,347 1,285,593 1,180,982 12,356,400 11,461,231 15,826 15,275 5,484 4,329 14,753,28113,862,164 612,480 $15,365,761 627,771 $14,489,935 LIABILITIES Current Liabilities Note payable -- Bank (Note 5) Accounts payable Accrued liabilities Federal income taxes payable Current portion of long-term debt (Note 6) Total Current Liabilities Long-term Liabilities Long-term debt (Note 6) TOTAL LIABILITIES $5,100,000 1,750,831 257,800 35,284 5,642 7,149,557 $4,250,000 1,403,247 217,003 45,990 5,642 5,921,882 $4,000,000 1,106,574 211,250 39.725 5,642 5,363,191 409,824 7,559,381 415,466 6,337,348 421,108 5,784,299 STOCKHOLDERS' EQUITY Common stock (Note 7) 10,000 10,000 10,000 Additional paid-in capital 2,500,000 2,500,000 2,500,000 Retained earnings 7,043,263 6,518,413 6,195,636 Total Stockholders' Equity 9,553,263 9,028,413 8,705,636 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $17,112,644 $15,365,761 $14,489,935 9,553,263 9028,413 The accompanying notes are an integral part of these financial statements Current workpapers - audit planning Oceanview Marine Company Statement of Income and Retained Earnings December 31, 2015 1-2 PBC Sales Sales returns and allowances Net sales Cost of sales Gross profit 2015 $26,456,647 37,557 26,419,090 19,133,299 7,285,791 2014 2013 $22,889,060 $20,950,521 27,740 28,753 22,861,32020,921,768 16,530,114 15,176,410 6,331,206 5,745,358 EXPENSES Accounting and auditing Advertising Depreciation Bad debt expense Business publications Cleaning services Fuel Garbage collection Insurance Interest Legal Licensing and certification fees Linen service Medical benefits Miscellaneous Office supplies Payroll benefits Pension expense Postage and courier Property taxes Rent Repairs and maintenance Salaries and wages Security Telephone Travel and entertainment Utilities Total Expenses Net income before income tax Income tax expense NET INCOME 48,253 28,624 46,415 148,252 1,231 15,817 64,161 4,870 16,415 427,362 69,752 33,580 3,044 4,178 47,739 26,390 569,110 40,770 8,623 3,978 158,526 51,316 4,310,281 96,980 5,707 21,633 63,329 6,316,336 969,455 344,605 624,850 46,750 27,947 46,578 162,344 872 12,809 53,566 4,674 16,303 364,312 29,914 27,142 1,939 4,624 16,631 23,289 461,214 37,263 20,962 27,947 120,000 26,439 3,970.092 100,098 7,092 16,303 41,919 5,669,023 662,183 239,406 422,777 44,610 24,654 41,538 147,629 115 11,620 41,593 5,650 16,144 356,829 22,654 24,148 2,393 4,287 25,430 21,462 430,688 18,900 22,511 26,144 112,846 26,519 3,703,580 93,800 8,611 14,952 40,827 5,290,134 455,224 199,631 255,593 6,040,043 Retained earnings at beginning of year Less: Dividends Retained earnings at end of year 6,518,413 100,000 $7,043,263 6,195,636 100,000 $6,518,413 $6,195,636 The accompanying notes are an integral part of these financial statements Current workpapers - audit planning JI, 2018 LUIS dations: In the space provided below. Idem misstated. The likelihood of misstatement may be indic is expected. Materiality reflects the size of the potential misstatement in measures. Include your evaluation as to why the account balance below, identify those accounts that you believe are most likely to be materially cment may be indicated by an unexpected fluctuation, or lack of fluctuation where one your evaluation as to why the account balance differs from your expectations. a misstatement in relation to net income and other financial statement Balance Sheet Accounts: Identify balance sheet accounts that you believe are mos evaluate why the fluctuation (or lack thereof) is significant. Account 2018 Ball 2017 Bal. Evaluation Allowance for doubtful 116,636 CR 116,636 CR accounts that you believe are most likely to be misstated, and Property, Allowance for doubtful accounts is based on ending A/R balance. Ending A/R balance increased by over 360,000 from prior year, but allowance for doubtful accounts remained constant. Plant This asset is 1596, 3176 12 480 lone declining. and the only lequipment Federal incond- Income has increased 3528445990 and and tax tax liability has I decreased. taxes panable li Income Statement Accounts: Identify income statement accounts that you believe are most likely to be misstated, and evaluate why the fluctuation (or lack thereof) is significant. Account 2018 Bal 2017 Bal. Evaluation Current workpapers ---audit planning + Page 2-4-b Oceanview Marine Company Preliminary Analytical Procedures: Identification of Accounts with Unexpected Fluctuation December 31, 2018 Divisional Income Statement Accounts: Identify three divisional income statement accounts that you believe are most likely to be misstated, and evaluate why the fluctuation (or lack thereof) is significant Evaluation 2017 Bal. 2018 Bal. Account & Division 1-1 PBC 2014 2013 Oceanview Marine Company Balance Sheet December 31, 2015 ASSETS Current Assets 2015 Cash $1,320,096 Accounts receivable: net (Notes 2 and 5) 1,646,046 Inventories (Notes 1(a), 3, and 5) 13,524,349 Prepaid expenses 17,720 Deposits 7,916 Total Current Assets 16,516,127 Property, Plant, and Equipment (Notes 1(b) and 4) At cost, less accumulated depreciation 596,517 TOTAL ASSETS $17,112,644 $1,089,978 $1,200,347 1,285,593 1,180,982 12,356,400 11,461,231 15,826 15,275 5,484 4,329 14,753,28113,862,164 612,480 $15,365,761 627,771 $14,489,935 LIABILITIES Current Liabilities Note payable -- Bank (Note 5) Accounts payable Accrued liabilities Federal income taxes payable Current portion of long-term debt (Note 6) Total Current Liabilities Long-term Liabilities Long-term debt (Note 6) TOTAL LIABILITIES $5,100,000 1,750,831 257,800 35,284 5,642 7,149,557 $4,250,000 1,403,247 217,003 45,990 5,642 5,921,882 $4,000,000 1,106,574 211,250 39.725 5,642 5,363,191 409,824 7,559,381 415,466 6,337,348 421,108 5,784,299 STOCKHOLDERS' EQUITY Common stock (Note 7) 10,000 10,000 10,000 Additional paid-in capital 2,500,000 2,500,000 2,500,000 Retained earnings 7,043,263 6,518,413 6,195,636 Total Stockholders' Equity 9,553,263 9,028,413 8,705,636 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $17,112,644 $15,365,761 $14,489,935 9,553,263 9028,413 The accompanying notes are an integral part of these financial statements Current workpapers - audit planning Oceanview Marine Company Statement of Income and Retained Earnings December 31, 2015 1-2 PBC Sales Sales returns and allowances Net sales Cost of sales Gross profit 2015 $26,456,647 37,557 26,419,090 19,133,299 7,285,791 2014 2013 $22,889,060 $20,950,521 27,740 28,753 22,861,32020,921,768 16,530,114 15,176,410 6,331,206 5,745,358 EXPENSES Accounting and auditing Advertising Depreciation Bad debt expense Business publications Cleaning services Fuel Garbage collection Insurance Interest Legal Licensing and certification fees Linen service Medical benefits Miscellaneous Office supplies Payroll benefits Pension expense Postage and courier Property taxes Rent Repairs and maintenance Salaries and wages Security Telephone Travel and entertainment Utilities Total Expenses Net income before income tax Income tax expense NET INCOME 48,253 28,624 46,415 148,252 1,231 15,817 64,161 4,870 16,415 427,362 69,752 33,580 3,044 4,178 47,739 26,390 569,110 40,770 8,623 3,978 158,526 51,316 4,310,281 96,980 5,707 21,633 63,329 6,316,336 969,455 344,605 624,850 46,750 27,947 46,578 162,344 872 12,809 53,566 4,674 16,303 364,312 29,914 27,142 1,939 4,624 16,631 23,289 461,214 37,263 20,962 27,947 120,000 26,439 3,970.092 100,098 7,092 16,303 41,919 5,669,023 662,183 239,406 422,777 44,610 24,654 41,538 147,629 115 11,620 41,593 5,650 16,144 356,829 22,654 24,148 2,393 4,287 25,430 21,462 430,688 18,900 22,511 26,144 112,846 26,519 3,703,580 93,800 8,611 14,952 40,827 5,290,134 455,224 199,631 255,593 6,040,043 Retained earnings at beginning of year Less: Dividends Retained earnings at end of year 6,518,413 100,000 $7,043,263 6,195,636 100,000 $6,518,413 $6,195,636 The accompanying notes are an integral part of these financial statements Current workpapers - audit planning JI, 2018 LUIS dations: In the space provided below. Idem misstated. The likelihood of misstatement may be indic is expected. Materiality reflects the size of the potential misstatement in measures. Include your evaluation as to why the account balance below, identify those accounts that you believe are most likely to be materially cment may be indicated by an unexpected fluctuation, or lack of fluctuation where one your evaluation as to why the account balance differs from your expectations. a misstatement in relation to net income and other financial statement Balance Sheet Accounts: Identify balance sheet accounts that you believe are mos evaluate why the fluctuation (or lack thereof) is significant. Account 2018 Ball 2017 Bal. Evaluation Allowance for doubtful 116,636 CR 116,636 CR accounts that you believe are most likely to be misstated, and Property, Allowance for doubtful accounts is based on ending A/R balance. Ending A/R balance increased by over 360,000 from prior year, but allowance for doubtful accounts remained constant. Plant This asset is 1596, 3176 12 480 lone declining. and the only lequipment Federal incond- Income has increased 3528445990 and and tax tax liability has I decreased. taxes panable li Income Statement Accounts: Identify income statement accounts that you believe are most likely to be misstated, and evaluate why the fluctuation (or lack thereof) is significant. Account 2018 Bal 2017 Bal. Evaluation Current workpapers ---audit planning + Page 2-4-b Oceanview Marine Company Preliminary Analytical Procedures: Identification of Accounts with Unexpected Fluctuation December 31, 2018 Divisional Income Statement Accounts: Identify three divisional income statement accounts that you believe are most likely to be misstated, and evaluate why the fluctuation (or lack thereof) is significant Evaluation 2017 Bal. 2018 Bal. Account & Division