3. Evaluate the preliminary analytical procedures completed by X&X (workpapers B.3.1 to B.3.3) a. Determine if the analyses of account fluctuations were appropriately performed and completed (workpapers B.3.1 and B.3.2). Review the explanations of account fluctuations provided by the auditors. Describe any problems you identify. Please document the issue Descrbe what the issue is in terms of nature, timing, and extent cancluaons, notes, adjustments, ratio analysis Document the workpaper number What is the soultuon to the issue There are a total of 12 issues. Find 9 issues to get the full credit with proper sources and explanations. WP Issue B.3.2 Page 1 of 2. After analyzing the workpaper there was an error found. An increase in revenue was found in the account Sales Revenue: Corporate Accounts of $10,689.01 for year 20X1 to 20X2 not a decrease as stated in the WP. B 3.2 page 2 of 2 After analyzing the workpaper a miscalculation occurred in the income tax expense. Income tax expense was added to earnings before income tax rather than subtracted. Net Income is overstated for both 20X1 and 20X2. Balance Sheets as of 3/31/20X2 and 12/31/20x1 (USD $) Audit Year December 31, 20X2 C SUIM 1 12 Reviewed by: TKT 9/20/20X2 B.3.1 As of 12/31/20X1 As of 3/31/20X1 3/31/20X2 $125,498.76 293,728.03 123,432.43 122,849.12 2,379.00 4,777.00 25,190.66 1,423.05 3.340.20 $702.618.35 $135,135.15 210,019.06 124,726.15 193,976.31 2,604.00 4,713.00 25,580.09 1,190.10 3.260.80 $701,204.66 $151,293.51 57,069.68 122,931.81 159,537.02 2,133.00 3,808.00 26,779.44 434.95 2,348.50 $526,335.91 Balance Sheet: Current Assets Cash: Storefront Cash: Corporate Accounts Cash: Payroll Accounts Receivable Office Supplies Cooking Supplies Inventory: Ingredients Inventory: Cake Boxes and Cupcake Cups Inventory: Beverages Total Current Assets Long-term Assets Equipment Accumulated Depreciation Equipment Plant & Property Accumulated Depreciation: Plant & Property and Al long-term assets Total Assets Liabilities Accounts Payable Wage Taxes Payable Corporate Income Tax Payable Dividends Payable Mortgage Payablela Notes Payable: Vehicles Total Liabilities Stockholders' Equity Common Stock, Par value $1.00, Authorized 1,000,000 shares; Issued and outstanding 50,000 shares Additional Paid in Capital Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 150,180.00 (82,455.00) 330,000.00 (82,500.00) 125,000.00 $440,225.00 $1,142,843.35 150,180.00 178,828.00) 330,000.00 179,200.00) 125,000.00 $447,152.00 $1,148,356.66 150,180.00 (66,372.00) 330,000.00 (69,300.00) 125,000.00 $469,508.00 $995,843.91 25,712.00 0.00 21,247.78 0.00 290,673.81 22,555.53 $360,189.12 38,556.70 0.00 38,125.96 13,125.00 292,262.13 24,878.31 $406,948.10 40,168.65 0.00 18,683.66 0.00 296,909.93 31,659.28 $387,421.52 50,000.00 120,075.91 612,578,32 $782,654.23 $1 142.843.35 50,000.00 120,075.91 571,332.65 $741,408,56 B.2.1 $1,148,356.66 50,000.00 120,075.91 438,346.48 $608,422.39 $995,843.91 Lurrent portion $6,555.19 at 3/31/20X2 and $6,236.12 at 3/31/20X1 Current portion $8,337.88 at 3/31/20x2 and $9,103.75 at 3/31/20X1 B.1.1: pg. 1 of 1 Client Supporting Document 41 Income Statements for the Months Ended 3/31/2012 and Audit Year December 31, 20X2 3/20 PRC Reviewed by: TKT 9/20/20X2 3.3.2 3 Months Ended 3 Months Ended 03/31/2012 3/31/20X1 $353,739.57 $343,050.56 80,649.00 91.411.50 $434,388.57 $434 A62.06 66,736.39 64,645.54 3,875.55 3.755.55 5456 50 5,581.50 $76,078.44 $358,310.13 $360,379,37 89.00 65.00 $358,399.13 $350.444.37 Revenue Sales Revenue: Corporate Accounts Sales Revenues: Storefront Total Sales Revenue Cost of Goods Sold: Ingredients Cost of Goods Sold: Boxes and Cupcake Cups Cost of Goods Sold: Beverages Total COGS Gross Profit Interest Revenue Gross Profit Plus Interest Revenue Expenses Wage Expense Wage Tax Expense Medical Insurance Expense Auto Insurance Expense Interest Expense Electrical & Gas Service Expense Liability Insurance Expense Telecommunications Expense Cell Phone Service Expense Postage Expense Professional Services Expense Maintenance Expense Office Supplies Expense Dry Cleaning Expense Storefront Paper Supplies Expense Rental Expense Waste Services Expense Car Maintenance and Fuel Expense Repair Expense Water Expense Soda Machine Repair and CO2 Expense Credit Card Expense Cooking Supplies Expense Banking Fees Seling and Administrative Expenses Depreciation Expense: Equipment Depreciation Expense: Plant & Property Total Depreciation Expense Total Expenses 216,719.00 17,971.24 8,100.00 1,035.00 3,996.90 1,523,20 3,768.40 472.50 912.00 139.50 2,070.00 1,212.00 8,050.00 398.75 778.25 4,752.00 150.00 995.38 372.50 378.75 1.156.00 878.31 12,704.00 445.00 $288,978.68 3,627.00 3,300.00 $6,927.00 $295,905.68 217,791.00 18,077.94 17,100.00 1,035.00 4.197.69 1,708.00 3,693,50 462.00 933.00 135.90 2,122.50 1,132.00 7,342.00 416.15 869.00 4,752.00 150.00 1,026.78 381.25 373.75 1,128.00 897.89 11,858.00 1445.00 $298,028.45 4.152.00 3.300.00 $7,452.00 $305,480.45 B.1.2: pg. 1 of 2 Client Supporting Document SDM 9/15/20x2 Income Statements for the 3 Months Ended 3/31/20X2 and 3/31/20X1 (USD $) CUK and 5/31/2017 (USO Reviewed by: Audit Year December 31, 20X2 TKJ 9/20/20X2 B.3.2 3 Months Ended 3 Months Ended 03/31/20X2 03/31/20X1 62,493.45 54,963.92 21,247.78 18,683.66 $41,245.67 $36,280.26 Earings Before Income Taxes Income Tax Expense Net Income Earnings per Share $0.82 $0.73 o B company, Preliminary Analytical Procedures-Balance Sheets Audit Year December 31, 20X2 Performed by: SDM 20/1/20X2 Reviewed by: TKT 10/9/20X2 As of 12/31/20X1 $ Change Change $135,135.15 210,019.06 124,726.15 193,976.31 2,604.00 4,713.00 25,580.09 1,190.10 3,260,80 $701,204.66 (8,636.39) 84,708.97 (293.72) (70,127.19) 775.00 1 ,064.00 610.57 1.232.95 1 ,079.50 6.39% 1 40.33% 1 -0.24% -36,15% 2 29.76% 22.58% 2.39% 103.60% 33.11% 0.00% 3.1.1 As of 3/31/20X2 Current Assets Cash: Storefront $125,498.76 Cash: Corporate Accounts 293,728.03 Cash: Payroll 123,432.43 Accounts Receivable 122,849.12 Office Supplies 2,379.00 Cooking Supplies 4,777.00 Inventory: Ingredients 25,190.66 Inventory: Cake Boxes and Cupcake Cups 1,423.05 Inventory. Beverages 3,340.30 Total Current Assets $702,618.35 Long-Term Assets Equipment 150,180.00 Accumulated Depreciation Equipment (82,455.00) Plant & Property 330,000.00 Accumulated Depreciation: Plant & Proprty (82,500.00) Land 125,000.00 Total Long-Term assets 440,225.00 Total Assets $1,142,843.35 Liabilides Accounts Payable $25,712.00 Wage Taxes Payable 0.00 Corporate Income Tax Payable 21,247.78 Dividends Payable 0.00 Mortgage Payable 290,673.81 Notes Payable: Vehicles 22,555.53 Total Liabilities 360,189.12 Stockholders' Equity Common Stock, Par value $1.00; Authorized 1,000,000, Issued and outstanding 50,000 shares 50,000.00 Additional Pald in Capital 120,075.91 Retained Earnings 612,578.32 Total Stockholders' Equity 782,654.23 Total Llabilities and Stockholders' Equity $1,142,843.35 150,180.00 (78,828.00) 330,000.00 179,200.00) 125,000.00 $447,152.00 $1,148,356.66 0.00 3,627.00 0.00 3,300.00 0.00 4 0.00% .17% 0.00% 38,556.70 0.00 3 8,125.96 13,125.00 292,262.13 2 4,878.31 $406,948.10 (12,844.70) 0.00 (16,878.18) (13,125.00) (1.588.32) (2,322.78) 33.31% 3 0.00% 44.27% -100.00% 5 -0.54% 1.-9.34% 50,000.00 120,075.91 571,332,65 $741,408.56 $1,148,356.66 0.00 0.00 41,245.67 0.00% 0.00% 7.22% -The fluctuation is less than TM ($13.700) and less than a 10% change. F-Footed ARA Audit Workpaper B.3.1: pg. 1 of 2 Preliminary Analytical Procedures-Balance Sheets Reviewed by: Audit Year December 31, 20X2 TKJ 10/9/20X2 1- We discussed the fluctuation in the cash accounts with Miguel Lopez, Store Manager and Cash Receipts Accounting. He stated that cash fluctuates drastically depending on the timing of cash receipts and disbursements. The company tries to keep less cash in the storefront account and more cash in the operating account to earn more interest. The company has not had a significant purchase in the past year, so the overall cash balance has significantly increased. The company plans to purchase some new cooking equipment in the -next year to expand the business and take on some new accounts. In addition, the company has paid down some debt. - We discussed the lower AR balance from prior year with Lisa Thomas, Corporate Sales Representative. She noted that the company has seen a slight decline in Corporate Sales primarily due to having two customers reducing their purchases in 20x2. These two customers are Luigi's Bistro and Mountain Lion Restaurant. In addition, the Company has made new efforts to collect from its customers in a timelier manner. If a customer does not pay in 30 days, Alpine calls the customer weekly to discuss and requests payment as soon as possible. 3 - We discussed changes in Accounts Payable with Lindsay McKenna. She noted that the company experienced a slight dip in purchase prices and the amount of purchases in Q1 20x2 in all of the vendors' accounts except for Mountain Dairy Company. The company expects sales to increase in Q2, so that payables will be in line with previous year activity with vendors. Milk prices have been increasing, so there is a concern that the cost of production will go up with milk and potentially sugar costs throughout 20x2. In addition, Lindsay stated that this change in the account is immaterial to the company's financial statements and is a reasonable fluctuation in this type of business. 4- Per discussion with Miguel Lopez, the company paid the income tax payable amount of $38,125.96 from Q4 in 20x1 on January 14, 20x2. The new balance of $21,247.78 relates to the first quarter 20x2 income tax expense. The company pays its income taxes on a quarterly basis. Miguel stated that the dividends payable was paid in the first quarter 20x2 on April 24,20x2 to Wasatch Range Trust. The company pays the dividends on an annual basis. Preliminary Analytical Procedures-Quarterly Income Statements Reviewed by: Audit Year December 31, 20X2 TKJ 10/9/20X2 B.1.2 3 Months Ended 03/31/20x2 3 Months Ended 03/31/20x1$ Change % Change -3.12% 1 Revenue Sales Revenue: Corporate Accounts Sales Revenues: Storefront Total Sales Revenue Cost of Goods Sold: Ingredients Cost of Goods Sold: Boxes and Cupcake Cups Cost of Goods Sold: Beverages Total COGS Gross Profit Interest Revenue Gross Profit Plus Interest Revenue $353,739.57 $343,050.56 (10,689.01) 80,649.00 91,411.50 (10,762.50) 434,388.57 434,462.06 (73.49) 66,736.3964,645.54 2,090.75 3,875.55 3,755.55 120,00 5,466.50 5,681.50 (215.00) 76,078.44 74,082.69 1.995.75 358,310.13 360,379.37 89.00 65.00 24.00 358,399.13 360 444.37 -0.01% 3.23% 3.20% -3.78% 2.69% - 36.92% Expenses Wage Expense Wage Tax Expense Medical Insurance Expense Auto Insurance Expense Interest Expense Electrical & Gas Service Expense Liability Insurance Expense Telecommunications Expense Cell Phone Service Expense Postage Expense Professional Services Expense Maintenance Expense Office Supplies Expense Dry Cleaning Expense Storefront Paper Supplies Expense Rental Expense Waste Services Expense 216,719.00 217,791.00 17,971.24 18,077.94 8,100.00 17,100.00 1,035.001,035.00 3,996.90 4,197.69 1,523.20 1,708.00 3,768.40 3,693.60 472.50 -462.00 912.00 933.00 139.50 135.90 2,070.00 2,122.50 1,212.00 1,132.00 8,050.00 7,342.00 398.75 416.15 778.25 869.00 4,752.00 4,752.00 150.00 150.00 (1,072.00) (106.70) (9,000.00). 0.00 (200.79) (184.80) 74.80 10.50 (21.00) 3.60 (52.50) 80.00 -0.49% -0.59% va -52.63% 0.00% -4.78% -10.82% 2.03% 2.27% -2.25% 2.65% -2.47% 7.07% 9.54% 4.18% -10,44% 0.00% 0.00% 708.00 (17.40) (90,75) 0.00 0.00 B.3.2. p. 1 of 2 ARA Audit Workpaper W u yuu Procedures-quatery income statements a nd Audit Year December 31, 2012 TKT 10/9/20X2 3 Months Ended 03/31/20/2 3 Months Ended 03/31/20x1 Change -3.06% -2.30% 14 2.48% Expenses (continued) Car Maintenance and Fuel Expense Repair Expense Water Expense Soda Machine Repair and CO2 Expense Credit Card Expense Cooking Supplies Expense Banking Fees Selling and Administrative Expenses Depreciation Expense: Equipment Depreciation Expense: Plant & Property Total Depreciation Expense Total Expenses 2.183 995.38 372.50 378.75 1,156.00 878.31 12,704.00 445.00 288,978.68 3,627.00 3,300.00 6,927.00 295,905.68 (31.40) (8.75) 5.00 28.00 (19.58) 846.00 0.00 1,026.78 381.25 373.75 1,128.00 897.89 11,858.00 445.00 298,028.45 4,152.00 3,300.00 7,452.00 305,480.45 7.13% 0.00% -12.54% (525.00) 0.00 brings Before Income tax 62,493.45 54,963.92 Income Tax Expense 21,247.78 18,683.66 2,564.12 Net Income $83,741.23 $73.347.58 F Auditor Notes: -The fluctuation is less than TM ($13,700) and less than a 20 change. F-Footed 1 - The Company has seen decreases in both their corporate and storefront sales. The Company has experienced a decrease in birthday party and holiday orders leading to the decline in storefront sales. Most customers order these items a week before the event and pick them up in the store. The decrease in corporate accounts revenue is primarily due to two customers, Luigi's Bistro and Steinberg Dells. The Company expects corporate sales to pick up through the rest of the year. 2.We discussed the change in the medical insurance expense account with Lindsay McKenna. Lindsay said the increase in medical Insurance expense from prior year is due to accidentally paying $3,000 more on each check that was written to Blue Cross Blue Shield in Olof 20X1. The Company received a refund of $9,000 from the medical insurance company in April 20Xs due to the mistakes in payments. Art Audit Workpaper B.3.2. pg 2 of 2 B Cenyany Preminary Anny Pre Rate Analyse Adhar December 2010 SOM Redewly NV 100K Primary An a Audar December 11, l Analysis 2 SOM Rerewed by VION Auditore Short-term L y Rules Ally to Meet Tigers T IN LP O Det utvending in cables 126.700 . -5N AP Derso oryon Hand Gres Prott Percentage Pe Map Neurons 101.710 4710 4033 0.001 0.004 IN BP 0.0 0.036 DIN 0.053 0.060 -17% rt Activity Rules How tively Autore Managed Alle Turner and well Dywany 65 navedener wdry Turnie r D irty Hond365. Inventory Turner Profitability Ratios Grera- Prer Merc edes te Cance Come Cover Le t De Soul Trees Current Ratio Quote Min 105 400 27 128 150.0840 0.34 Max 15.30 34.00 5.68 215.43 44 D 158.54 i ngin Bec intory Tower Days of i t and utt Percenta The current and quick screased and primarily due to increase in corporate cash of 266029378 from Xitoy At noen our balance sheet analysis Miguel Loperc uctuates drastically depending on the timing of cash receipts and purchases. The company has not made major purchasin the past year, but plans to make some purchases in 2009. In addition, the current lots in he decreased from primarily due to the timing of pargounts payable balances and thening of purchases The company's collecting more than the priory . Prov with them , the company is taling addition as to have some per namontime by sandaling meny D 033 G 00 043 010 2 009 Rerum A S Remonty 004 0.04 178 0.00399 Deuty Andre Note: **Calculation includes current portion of mortgage payable and notes payable based on demanation schedule on the current portions of the mortgage and not able and respectively. On the current portion of the mortgage and notes palestre Je compromise proyeur de to ut Sales and decrease in the competing and admitteen Po w th Miguel Lopes, the company has growth and has performed wintion to the Industry competitors largely because the company has buits reputation for quality and has maintained good relationships with inders to keep costs down 4-The company's Roignificantly lower than proyear. We have requested time to meet with Miguel Lopes to do the difference in this ratio in comparison to our operator s. The company debt tots and debt to equity ratios have decreed from prior year due to he decrease in the long term song with the dece n t counts payable due to turning of purchases and p arts of abne 3332 AA Aur Wor AA Audio B1202 b company prate Corporate Sales Analysis Au Vear under 1.200 Performed by: ST Reviewed by SOM O 5. berember 31, 2012 7 A ts Reviewed by SOM 200 dedi. 78. Admin wel. PHP Custowane Bon Appetserar Ordere wer 93.453 142,11.30 5.05 12.18.00 e 14001 11 116.30 1631 114 1,150 982 21032 10 1401 40 15.45 5 .80 A f os .000 9 - Sale 1 - M i nner of the law .000w wed by any d aw. Mpendwa na w And weddin S 37 Der Bakery Dervenon arte Cote hapa 19.99 31.034 1210 46 00 7417.00 4 45 3,07120 11013006 19.842 COD 1 0 .40 20 24,288 2216 144000 15 30 951) R 1443 2,671.6 14.0675 080 13,994 12, 5 0 29,365 6.30 3,515 HANS 39,633 14.30 2140 High Court Coba Je weg O 6.000 . 7411120 Mile Shoes 23 14,4 12,269 25.02.10 29,4.5.60 Mountain Touth House 7900 2 .0 im Scom Smokey's Bar 8.403.60 15.01.20 42.002.00 17,50 12,400 2,277.0 5.700 32. Fuchs Honda er och 40.00 22.216.00 SASTO 19110 5 4111 111.483. 11102 46,735 1456..1 Corporate R 1,47512 Aet A Audit Workpoper po tofa I ALA Adit werkpapan A233 og 7012 .. 3. Evaluate the preliminary analytical procedures completed by X&X (workpapers B.3.1 to B.3.3) a. Determine if the analyses of account fluctuations were appropriately performed and completed (workpapers B.3.1 and B.3.2). Review the explanations of account fluctuations provided by the auditors. Describe any problems you identify. Please document the issue Descrbe what the issue is in terms of nature, timing, and extent cancluaons, notes, adjustments, ratio analysis Document the workpaper number What is the soultuon to the issue There are a total of 12 issues. Find 9 issues to get the full credit with proper sources and explanations. WP Issue B.3.2 Page 1 of 2. After analyzing the workpaper there was an error found. An increase in revenue was found in the account Sales Revenue: Corporate Accounts of $10,689.01 for year 20X1 to 20X2 not a decrease as stated in the WP. B 3.2 page 2 of 2 After analyzing the workpaper a miscalculation occurred in the income tax expense. Income tax expense was added to earnings before income tax rather than subtracted. Net Income is overstated for both 20X1 and 20X2. Balance Sheets as of 3/31/20X2 and 12/31/20x1 (USD $) Audit Year December 31, 20X2 C SUIM 1 12 Reviewed by: TKT 9/20/20X2 B.3.1 As of 12/31/20X1 As of 3/31/20X1 3/31/20X2 $125,498.76 293,728.03 123,432.43 122,849.12 2,379.00 4,777.00 25,190.66 1,423.05 3.340.20 $702.618.35 $135,135.15 210,019.06 124,726.15 193,976.31 2,604.00 4,713.00 25,580.09 1,190.10 3.260.80 $701,204.66 $151,293.51 57,069.68 122,931.81 159,537.02 2,133.00 3,808.00 26,779.44 434.95 2,348.50 $526,335.91 Balance Sheet: Current Assets Cash: Storefront Cash: Corporate Accounts Cash: Payroll Accounts Receivable Office Supplies Cooking Supplies Inventory: Ingredients Inventory: Cake Boxes and Cupcake Cups Inventory: Beverages Total Current Assets Long-term Assets Equipment Accumulated Depreciation Equipment Plant & Property Accumulated Depreciation: Plant & Property and Al long-term assets Total Assets Liabilities Accounts Payable Wage Taxes Payable Corporate Income Tax Payable Dividends Payable Mortgage Payablela Notes Payable: Vehicles Total Liabilities Stockholders' Equity Common Stock, Par value $1.00, Authorized 1,000,000 shares; Issued and outstanding 50,000 shares Additional Paid in Capital Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 150,180.00 (82,455.00) 330,000.00 (82,500.00) 125,000.00 $440,225.00 $1,142,843.35 150,180.00 178,828.00) 330,000.00 179,200.00) 125,000.00 $447,152.00 $1,148,356.66 150,180.00 (66,372.00) 330,000.00 (69,300.00) 125,000.00 $469,508.00 $995,843.91 25,712.00 0.00 21,247.78 0.00 290,673.81 22,555.53 $360,189.12 38,556.70 0.00 38,125.96 13,125.00 292,262.13 24,878.31 $406,948.10 40,168.65 0.00 18,683.66 0.00 296,909.93 31,659.28 $387,421.52 50,000.00 120,075.91 612,578,32 $782,654.23 $1 142.843.35 50,000.00 120,075.91 571,332.65 $741,408,56 B.2.1 $1,148,356.66 50,000.00 120,075.91 438,346.48 $608,422.39 $995,843.91 Lurrent portion $6,555.19 at 3/31/20X2 and $6,236.12 at 3/31/20X1 Current portion $8,337.88 at 3/31/20x2 and $9,103.75 at 3/31/20X1 B.1.1: pg. 1 of 1 Client Supporting Document 41 Income Statements for the Months Ended 3/31/2012 and Audit Year December 31, 20X2 3/20 PRC Reviewed by: TKT 9/20/20X2 3.3.2 3 Months Ended 3 Months Ended 03/31/2012 3/31/20X1 $353,739.57 $343,050.56 80,649.00 91.411.50 $434,388.57 $434 A62.06 66,736.39 64,645.54 3,875.55 3.755.55 5456 50 5,581.50 $76,078.44 $358,310.13 $360,379,37 89.00 65.00 $358,399.13 $350.444.37 Revenue Sales Revenue: Corporate Accounts Sales Revenues: Storefront Total Sales Revenue Cost of Goods Sold: Ingredients Cost of Goods Sold: Boxes and Cupcake Cups Cost of Goods Sold: Beverages Total COGS Gross Profit Interest Revenue Gross Profit Plus Interest Revenue Expenses Wage Expense Wage Tax Expense Medical Insurance Expense Auto Insurance Expense Interest Expense Electrical & Gas Service Expense Liability Insurance Expense Telecommunications Expense Cell Phone Service Expense Postage Expense Professional Services Expense Maintenance Expense Office Supplies Expense Dry Cleaning Expense Storefront Paper Supplies Expense Rental Expense Waste Services Expense Car Maintenance and Fuel Expense Repair Expense Water Expense Soda Machine Repair and CO2 Expense Credit Card Expense Cooking Supplies Expense Banking Fees Seling and Administrative Expenses Depreciation Expense: Equipment Depreciation Expense: Plant & Property Total Depreciation Expense Total Expenses 216,719.00 17,971.24 8,100.00 1,035.00 3,996.90 1,523,20 3,768.40 472.50 912.00 139.50 2,070.00 1,212.00 8,050.00 398.75 778.25 4,752.00 150.00 995.38 372.50 378.75 1.156.00 878.31 12,704.00 445.00 $288,978.68 3,627.00 3,300.00 $6,927.00 $295,905.68 217,791.00 18,077.94 17,100.00 1,035.00 4.197.69 1,708.00 3,693,50 462.00 933.00 135.90 2,122.50 1,132.00 7,342.00 416.15 869.00 4,752.00 150.00 1,026.78 381.25 373.75 1,128.00 897.89 11,858.00 1445.00 $298,028.45 4.152.00 3.300.00 $7,452.00 $305,480.45 B.1.2: pg. 1 of 2 Client Supporting Document SDM 9/15/20x2 Income Statements for the 3 Months Ended 3/31/20X2 and 3/31/20X1 (USD $) CUK and 5/31/2017 (USO Reviewed by: Audit Year December 31, 20X2 TKJ 9/20/20X2 B.3.2 3 Months Ended 3 Months Ended 03/31/20X2 03/31/20X1 62,493.45 54,963.92 21,247.78 18,683.66 $41,245.67 $36,280.26 Earings Before Income Taxes Income Tax Expense Net Income Earnings per Share $0.82 $0.73 o B company, Preliminary Analytical Procedures-Balance Sheets Audit Year December 31, 20X2 Performed by: SDM 20/1/20X2 Reviewed by: TKT 10/9/20X2 As of 12/31/20X1 $ Change Change $135,135.15 210,019.06 124,726.15 193,976.31 2,604.00 4,713.00 25,580.09 1,190.10 3,260,80 $701,204.66 (8,636.39) 84,708.97 (293.72) (70,127.19) 775.00 1 ,064.00 610.57 1.232.95 1 ,079.50 6.39% 1 40.33% 1 -0.24% -36,15% 2 29.76% 22.58% 2.39% 103.60% 33.11% 0.00% 3.1.1 As of 3/31/20X2 Current Assets Cash: Storefront $125,498.76 Cash: Corporate Accounts 293,728.03 Cash: Payroll 123,432.43 Accounts Receivable 122,849.12 Office Supplies 2,379.00 Cooking Supplies 4,777.00 Inventory: Ingredients 25,190.66 Inventory: Cake Boxes and Cupcake Cups 1,423.05 Inventory. Beverages 3,340.30 Total Current Assets $702,618.35 Long-Term Assets Equipment 150,180.00 Accumulated Depreciation Equipment (82,455.00) Plant & Property 330,000.00 Accumulated Depreciation: Plant & Proprty (82,500.00) Land 125,000.00 Total Long-Term assets 440,225.00 Total Assets $1,142,843.35 Liabilides Accounts Payable $25,712.00 Wage Taxes Payable 0.00 Corporate Income Tax Payable 21,247.78 Dividends Payable 0.00 Mortgage Payable 290,673.81 Notes Payable: Vehicles 22,555.53 Total Liabilities 360,189.12 Stockholders' Equity Common Stock, Par value $1.00; Authorized 1,000,000, Issued and outstanding 50,000 shares 50,000.00 Additional Pald in Capital 120,075.91 Retained Earnings 612,578.32 Total Stockholders' Equity 782,654.23 Total Llabilities and Stockholders' Equity $1,142,843.35 150,180.00 (78,828.00) 330,000.00 179,200.00) 125,000.00 $447,152.00 $1,148,356.66 0.00 3,627.00 0.00 3,300.00 0.00 4 0.00% .17% 0.00% 38,556.70 0.00 3 8,125.96 13,125.00 292,262.13 2 4,878.31 $406,948.10 (12,844.70) 0.00 (16,878.18) (13,125.00) (1.588.32) (2,322.78) 33.31% 3 0.00% 44.27% -100.00% 5 -0.54% 1.-9.34% 50,000.00 120,075.91 571,332,65 $741,408.56 $1,148,356.66 0.00 0.00 41,245.67 0.00% 0.00% 7.22% -The fluctuation is less than TM ($13.700) and less than a 10% change. F-Footed ARA Audit Workpaper B.3.1: pg. 1 of 2 Preliminary Analytical Procedures-Balance Sheets Reviewed by: Audit Year December 31, 20X2 TKJ 10/9/20X2 1- We discussed the fluctuation in the cash accounts with Miguel Lopez, Store Manager and Cash Receipts Accounting. He stated that cash fluctuates drastically depending on the timing of cash receipts and disbursements. The company tries to keep less cash in the storefront account and more cash in the operating account to earn more interest. The company has not had a significant purchase in the past year, so the overall cash balance has significantly increased. The company plans to purchase some new cooking equipment in the -next year to expand the business and take on some new accounts. In addition, the company has paid down some debt. - We discussed the lower AR balance from prior year with Lisa Thomas, Corporate Sales Representative. She noted that the company has seen a slight decline in Corporate Sales primarily due to having two customers reducing their purchases in 20x2. These two customers are Luigi's Bistro and Mountain Lion Restaurant. In addition, the Company has made new efforts to collect from its customers in a timelier manner. If a customer does not pay in 30 days, Alpine calls the customer weekly to discuss and requests payment as soon as possible. 3 - We discussed changes in Accounts Payable with Lindsay McKenna. She noted that the company experienced a slight dip in purchase prices and the amount of purchases in Q1 20x2 in all of the vendors' accounts except for Mountain Dairy Company. The company expects sales to increase in Q2, so that payables will be in line with previous year activity with vendors. Milk prices have been increasing, so there is a concern that the cost of production will go up with milk and potentially sugar costs throughout 20x2. In addition, Lindsay stated that this change in the account is immaterial to the company's financial statements and is a reasonable fluctuation in this type of business. 4- Per discussion with Miguel Lopez, the company paid the income tax payable amount of $38,125.96 from Q4 in 20x1 on January 14, 20x2. The new balance of $21,247.78 relates to the first quarter 20x2 income tax expense. The company pays its income taxes on a quarterly basis. Miguel stated that the dividends payable was paid in the first quarter 20x2 on April 24,20x2 to Wasatch Range Trust. The company pays the dividends on an annual basis. Preliminary Analytical Procedures-Quarterly Income Statements Reviewed by: Audit Year December 31, 20X2 TKJ 10/9/20X2 B.1.2 3 Months Ended 03/31/20x2 3 Months Ended 03/31/20x1$ Change % Change -3.12% 1 Revenue Sales Revenue: Corporate Accounts Sales Revenues: Storefront Total Sales Revenue Cost of Goods Sold: Ingredients Cost of Goods Sold: Boxes and Cupcake Cups Cost of Goods Sold: Beverages Total COGS Gross Profit Interest Revenue Gross Profit Plus Interest Revenue $353,739.57 $343,050.56 (10,689.01) 80,649.00 91,411.50 (10,762.50) 434,388.57 434,462.06 (73.49) 66,736.3964,645.54 2,090.75 3,875.55 3,755.55 120,00 5,466.50 5,681.50 (215.00) 76,078.44 74,082.69 1.995.75 358,310.13 360,379.37 89.00 65.00 24.00 358,399.13 360 444.37 -0.01% 3.23% 3.20% -3.78% 2.69% - 36.92% Expenses Wage Expense Wage Tax Expense Medical Insurance Expense Auto Insurance Expense Interest Expense Electrical & Gas Service Expense Liability Insurance Expense Telecommunications Expense Cell Phone Service Expense Postage Expense Professional Services Expense Maintenance Expense Office Supplies Expense Dry Cleaning Expense Storefront Paper Supplies Expense Rental Expense Waste Services Expense 216,719.00 217,791.00 17,971.24 18,077.94 8,100.00 17,100.00 1,035.001,035.00 3,996.90 4,197.69 1,523.20 1,708.00 3,768.40 3,693.60 472.50 -462.00 912.00 933.00 139.50 135.90 2,070.00 2,122.50 1,212.00 1,132.00 8,050.00 7,342.00 398.75 416.15 778.25 869.00 4,752.00 4,752.00 150.00 150.00 (1,072.00) (106.70) (9,000.00). 0.00 (200.79) (184.80) 74.80 10.50 (21.00) 3.60 (52.50) 80.00 -0.49% -0.59% va -52.63% 0.00% -4.78% -10.82% 2.03% 2.27% -2.25% 2.65% -2.47% 7.07% 9.54% 4.18% -10,44% 0.00% 0.00% 708.00 (17.40) (90,75) 0.00 0.00 B.3.2. p. 1 of 2 ARA Audit Workpaper W u yuu Procedures-quatery income statements a nd Audit Year December 31, 2012 TKT 10/9/20X2 3 Months Ended 03/31/20/2 3 Months Ended 03/31/20x1 Change -3.06% -2.30% 14 2.48% Expenses (continued) Car Maintenance and Fuel Expense Repair Expense Water Expense Soda Machine Repair and CO2 Expense Credit Card Expense Cooking Supplies Expense Banking Fees Selling and Administrative Expenses Depreciation Expense: Equipment Depreciation Expense: Plant & Property Total Depreciation Expense Total Expenses 2.183 995.38 372.50 378.75 1,156.00 878.31 12,704.00 445.00 288,978.68 3,627.00 3,300.00 6,927.00 295,905.68 (31.40) (8.75) 5.00 28.00 (19.58) 846.00 0.00 1,026.78 381.25 373.75 1,128.00 897.89 11,858.00 445.00 298,028.45 4,152.00 3,300.00 7,452.00 305,480.45 7.13% 0.00% -12.54% (525.00) 0.00 brings Before Income tax 62,493.45 54,963.92 Income Tax Expense 21,247.78 18,683.66 2,564.12 Net Income $83,741.23 $73.347.58 F Auditor Notes: -The fluctuation is less than TM ($13,700) and less than a 20 change. F-Footed 1 - The Company has seen decreases in both their corporate and storefront sales. The Company has experienced a decrease in birthday party and holiday orders leading to the decline in storefront sales. Most customers order these items a week before the event and pick them up in the store. The decrease in corporate accounts revenue is primarily due to two customers, Luigi's Bistro and Steinberg Dells. The Company expects corporate sales to pick up through the rest of the year. 2.We discussed the change in the medical insurance expense account with Lindsay McKenna. Lindsay said the increase in medical Insurance expense from prior year is due to accidentally paying $3,000 more on each check that was written to Blue Cross Blue Shield in Olof 20X1. The Company received a refund of $9,000 from the medical insurance company in April 20Xs due to the mistakes in payments. Art Audit Workpaper B.3.2. pg 2 of 2 B Cenyany Preminary Anny Pre Rate Analyse Adhar December 2010 SOM Redewly NV 100K Primary An a Audar December 11, l Analysis 2 SOM Rerewed by VION Auditore Short-term L y Rules Ally to Meet Tigers T IN LP O Det utvending in cables 126.700 . -5N AP Derso oryon Hand Gres Prott Percentage Pe Map Neurons 101.710 4710 4033 0.001 0.004 IN BP 0.0 0.036 DIN 0.053 0.060 -17% rt Activity Rules How tively Autore Managed Alle Turner and well Dywany 65 navedener wdry Turnie r D irty Hond365. Inventory Turner Profitability Ratios Grera- Prer Merc edes te Cance Come Cover Le t De Soul Trees Current Ratio Quote Min 105 400 27 128 150.0840 0.34 Max 15.30 34.00 5.68 215.43 44 D 158.54 i ngin Bec intory Tower Days of i t and utt Percenta The current and quick screased and primarily due to increase in corporate cash of 266029378 from Xitoy At noen our balance sheet analysis Miguel Loperc uctuates drastically depending on the timing of cash receipts and purchases. The company has not made major purchasin the past year, but plans to make some purchases in 2009. In addition, the current lots in he decreased from primarily due to the timing of pargounts payable balances and thening of purchases The company's collecting more than the priory . Prov with them , the company is taling addition as to have some per namontime by sandaling meny D 033 G 00 043 010 2 009 Rerum A S Remonty 004 0.04 178 0.00399 Deuty Andre Note: **Calculation includes current portion of mortgage payable and notes payable based on demanation schedule on the current portions of the mortgage and not able and respectively. On the current portion of the mortgage and notes palestre Je compromise proyeur de to ut Sales and decrease in the competing and admitteen Po w th Miguel Lopes, the company has growth and has performed wintion to the Industry competitors largely because the company has buits reputation for quality and has maintained good relationships with inders to keep costs down 4-The company's Roignificantly lower than proyear. We have requested time to meet with Miguel Lopes to do the difference in this ratio in comparison to our operator s. The company debt tots and debt to equity ratios have decreed from prior year due to he decrease in the long term song with the dece n t counts payable due to turning of purchases and p arts of abne 3332 AA Aur Wor AA Audio B1202 b company prate Corporate Sales Analysis Au Vear under 1.200 Performed by: ST Reviewed by SOM O 5. berember 31, 2012 7 A ts Reviewed by SOM 200 dedi. 78. Admin wel. PHP Custowane Bon Appetserar Ordere wer 93.453 142,11.30 5.05 12.18.00 e 14001 11 116.30 1631 114 1,150 982 21032 10 1401 40 15.45 5 .80 A f os .000 9 - Sale 1 - M i nner of the law .000w wed by any d aw. Mpendwa na w And weddin S 37 Der Bakery Dervenon arte Cote hapa 19.99 31.034 1210 46 00 7417.00 4 45 3,07120 11013006 19.842 COD 1 0 .40 20 24,288 2216 144000 15 30 951) R 1443 2,671.6 14.0675 080 13,994 12, 5 0 29,365 6.30 3,515 HANS 39,633 14.30 2140 High Court Coba Je weg O 6.000 . 7411120 Mile Shoes 23 14,4 12,269 25.02.10 29,4.5.60 Mountain Touth House 7900 2 .0 im Scom Smokey's Bar 8.403.60 15.01.20 42.002.00 17,50 12,400 2,277.0 5.700 32. Fuchs Honda er och 40.00 22.216.00 SASTO 19110 5 4111 111.483. 11102 46,735 1456..1 Corporate R 1,47512 Aet A Audit Workpoper po tofa I ALA Adit werkpapan A233 og 7012
