ABC Electronics Project: Analytical Review Procedures It is January 2018 and you are a staff accountant assigned to the 2017 audit of ABC Electronics. ABC is a closely held corporation managed by the founder and principal shareholder. Adam B. Clark. Your firm has audited ABC for the last five years. The audited financial statements for the years ended December 31, 2016 and 2015 are presented below, with the client's unaudited financial statements for 2017. Additional Information: ABC manufactures and sells DVD players and travel alarm clocks. All sales are on credit to department stores and electronics wholesaling companies. Credit terms are net 30 days. ABC offers a one-year warranty covering manufacturing defects. ABC uses a periodic inventory system and determines its year-end inventory by taking a physical count on December 31. You and your supervisor observed the count on December 31, 2017 and performed numerous test counts, but you have not performed further audit tests regarding inventory. The interest rate on all debt is 8 percent. Annual interest and principal payments ce due each December 1. Average Common Shares Outstanding is 10,000 for each year. INCOME STATEMENTS (5000's) C INCOME STATEMENTS (5000's) Years ended December 31 Sales Cost of goods sold Selling and general expenses Depreciation expense Warranty expense Bad debt expense Legal fees Interest expense Income tax expense Net Income Dividends paid E $ $ $ F 2017 7.750 $ 5,505 2.245 1,671 46 75 90 13 110 240 71 169 $ 125 S G 2016 7.713 S 5,381 2.332 1.622 55 65 85 14 127 364 109 255 $ 125 S H 2015 7,493 5.225 2.268 1,577 49 55 90 12 135 350 104 246 100 The following schedule shows the sales revenue and components of costs of goods sold for each of ABC's two products. B C E F G The following schedule shows the sales revenue and components of costs of goods sold for each of ABC's two products. SCHEDULES OF GROSS PROFIT (S000's) Years ended December 31 DVD Players Sales Cost of goods sold: Mil Labor OH Variance Depreciation Gross Profit Travel alarm clocks Sales Cost of goods sold: Mil Labor OH Variance Depreciation Gross Profit $ $ $ $ 2017 4.880 1.895 1,103 689 3 50 3.740 1,140 $. 2.870 $ 888 537 301 (2) $ 4.932 S 41 2016 1.835 1,074 664 5 70 3,648 1.284 $ 2.781 868 532 276 (3) 60 $ 1.765 1.733 1,105 $ 1.048 $ N 2015 4,791 Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to int 1,781 1.043 662 (4) 68 3.550 1.241 2,702 840 505 270 2 58 1,675 1.027 B Gross Profit C BALANCE SHEETS (S000's) December 31 Cash Accounts receivable Allowance for Doubtful Acets Inventories: Raw Materials Finished Goods: Prepaid expenses E Land Building and equipment Accumulated Depr. Total assets Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to inventory, a factor for depreciation is added to the material-labor-overhead standard to determine the inventory carrying cost. DVD players Travel alarms $ Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt $ S F $ 1.105 S 2017 36 $ 795 (70) 322 863 405 8 2.359 450 1,865 G 787 $ 16 1.048 S 40 100 943 2016 165 $ 674 (60) 304 738 390 2 (895) (790) 3,779 S 3.731 $ 2.213 450 1,858 675 $ 14 10 40 H 1,027 100 839 2015 77 658 (60) 286 710 374 4 2.049 450 1,831 (610) 3,720 694 13 11 40 100 858 B Prepare a Horizontal (Trend) Analysis of the Balance Sheet and Income Statement for E F H Land Building and equipment Accumulated Depr. Total assets Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt Long-term debt Paid-in-capital Retained earnings Total liabilities and equity S $ $ 2,359 450 1,865 (895) 3,779 S 787 S 16 H 40 100 943 1.300 2.243 550 986 1,536 3,779 $ 2.213 450 1,858 (790) 3.731 $ 675 10 40 100 839 1.400 2.239 550 942 1,492 3,731 $ . 2,049 450 1.831 (610) 3,720 694 13 11 40 100 858 1,500 2,358 550 812 1,362 3.720 3 ABC Electronics. KPI Ratios Listing December 31, 2017 1.) Current Ratio 6 Current Assets/Current Liabilities 2.) Working Capital 9 Current Assets - Current Liabilites 11 3.) Earnings Per Share 12 (Net Income - Preferred Dividends) / Avg. Common Shares Outstanding 14 4.) Gross Profit % (Overall) 15 Gross Profit/Net Sales 16 17 4.a.) Gross Profit % (DVD Players) 18 Gross Profit/ Net Sales 19 20 4.b.) Gross Profit % (Travel Alarms) 21 Gross Profit/Net Sales 22 23 5.) Inventory Turnover (Overall) 24 Cost of Goods Sold / Avg. Inventory 25 26 5.a.) Inventory Turnover (DVD Players) 27 Cost of Goods Sold / Avg. Inventory 28 29 5.b.) Inventory Turnover (Travel Alarms) B 2017 Fase Assignment Horizontal Vertical KPI Ratios Interim Audit Findings 2016 Follow-up Needed? + 1 K Audit Implication 22 23 5.) Inventory Turnover (Overall) 24 Cost of Goods Sold / Avg. Inventory 25 26 5.a.) Inventory Turnover (DVD Players) 27 Cost of Goods Sold / Avg. Inventory 28 A 29 5.b.) Inventory Turnover (Travel Alarms) 30 Cost of Goods Sold / Avg. Inventory 31 32 6.) Days in Inventory (Overall) 33 365 / Inventory Turnover 34 35 6.a.) Days in Inventory (DVD Players) 36 365/Inventory Turnover 37 38 6.b.) Days in Inventory (Travel Alarms) 39 365/Inventory Turnover 40 41 7.) Accounts Receivable Turnover 42 Net Credit Sales / Avg. Accounts Receivable 43 44 8.) Avg, Collection Period 45 365/ Accounts Receivable Turnover 46 47 9.) Return on Assets 48 Net Income / Avg Total Assets 49 50 10.) Times Interest Earned CA Case Assignment Bleache Horizontal Vertical XIV KPI Ratios Interim Audit Fi ABC Electronics Project: Analytical Review Procedures It is January 2018 and you are a staff accountant assigned to the 2017 audit of ABC Electronics. ABC is a closely held corporation managed by the founder and principal shareholder. Adam B. Clark. Your firm has audited ABC for the last five years. The audited financial statements for the years ended December 31, 2016 and 2015 are presented below, with the client's unaudited financial statements for 2017. Additional Information: ABC manufactures and sells DVD players and travel alarm clocks. All sales are on credit to department stores and electronics wholesaling companies. Credit terms are net 30 days. ABC offers a one-year warranty covering manufacturing defects. ABC uses a periodic inventory system and determines its year-end inventory by taking a physical count on December 31. You and your supervisor observed the count on December 31, 2017 and performed numerous test counts, but you have not performed further audit tests regarding inventory. The interest rate on all debt is 8 percent. Annual interest and principal payments ce due each December 1. Average Common Shares Outstanding is 10,000 for each year. INCOME STATEMENTS (5000's) C INCOME STATEMENTS (5000's) Years ended December 31 Sales Cost of goods sold Selling and general expenses Depreciation expense Warranty expense Bad debt expense Legal fees Interest expense Income tax expense Net Income Dividends paid E $ $ $ F 2017 7.750 $ 5,505 2.245 1,671 46 75 90 13 110 240 71 169 $ 125 S G 2016 7.713 S 5,381 2.332 1.622 55 65 85 14 127 364 109 255 $ 125 S H 2015 7,493 5.225 2.268 1,577 49 55 90 12 135 350 104 246 100 The following schedule shows the sales revenue and components of costs of goods sold for each of ABC's two products. B C E F G The following schedule shows the sales revenue and components of costs of goods sold for each of ABC's two products. SCHEDULES OF GROSS PROFIT (S000's) Years ended December 31 DVD Players Sales Cost of goods sold: Mil Labor OH Variance Depreciation Gross Profit Travel alarm clocks Sales Cost of goods sold: Mil Labor OH Variance Depreciation Gross Profit $ $ $ $ 2017 4.880 1.895 1,103 689 3 50 3.740 1,140 $. 2.870 $ 888 537 301 (2) $ 4.932 S 41 2016 1.835 1,074 664 5 70 3,648 1.284 $ 2.781 868 532 276 (3) 60 $ 1.765 1.733 1,105 $ 1.048 $ N 2015 4,791 Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to int 1,781 1.043 662 (4) 68 3.550 1.241 2,702 840 505 270 2 58 1,675 1.027 B Gross Profit C BALANCE SHEETS (S000's) December 31 Cash Accounts receivable Allowance for Doubtful Acets Inventories: Raw Materials Finished Goods: Prepaid expenses E Land Building and equipment Accumulated Depr. Total assets Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to inventory, a factor for depreciation is added to the material-labor-overhead standard to determine the inventory carrying cost. DVD players Travel alarms $ Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt $ S F $ 1.105 S 2017 36 $ 795 (70) 322 863 405 8 2.359 450 1,865 G 787 $ 16 1.048 S 40 100 943 2016 165 $ 674 (60) 304 738 390 2 (895) (790) 3,779 S 3.731 $ 2.213 450 1,858 675 $ 14 10 40 H 1,027 100 839 2015 77 658 (60) 286 710 374 4 2.049 450 1,831 (610) 3,720 694 13 11 40 100 858 B Prepare a Horizontal (Trend) Analysis of the Balance Sheet and Income Statement for E F H Land Building and equipment Accumulated Depr. Total assets Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt Long-term debt Paid-in-capital Retained earnings Total liabilities and equity S $ $ 2,359 450 1,865 (895) 3,779 S 787 S 16 H 40 100 943 1.300 2.243 550 986 1,536 3,779 $ 2.213 450 1,858 (790) 3.731 $ 675 10 40 100 839 1.400 2.239 550 942 1,492 3,731 $ . 2,049 450 1.831 (610) 3,720 694 13 11 40 100 858 1,500 2,358 550 812 1,362 3.720 3 ABC Electronics. KPI Ratios Listing December 31, 2017 1.) Current Ratio 6 Current Assets/Current Liabilities 2.) Working Capital 9 Current Assets - Current Liabilites 11 3.) Earnings Per Share 12 (Net Income - Preferred Dividends) / Avg. Common Shares Outstanding 14 4.) Gross Profit % (Overall) 15 Gross Profit/Net Sales 16 17 4.a.) Gross Profit % (DVD Players) 18 Gross Profit/ Net Sales 19 20 4.b.) Gross Profit % (Travel Alarms) 21 Gross Profit/Net Sales 22 23 5.) Inventory Turnover (Overall) 24 Cost of Goods Sold / Avg. Inventory 25 26 5.a.) Inventory Turnover (DVD Players) 27 Cost of Goods Sold / Avg. Inventory 28 29 5.b.) Inventory Turnover (Travel Alarms) B 2017 Fase Assignment Horizontal Vertical KPI Ratios Interim Audit Findings 2016 Follow-up Needed? + 1 K Audit Implication 22 23 5.) Inventory Turnover (Overall) 24 Cost of Goods Sold / Avg. Inventory 25 26 5.a.) Inventory Turnover (DVD Players) 27 Cost of Goods Sold / Avg. Inventory 28 A 29 5.b.) Inventory Turnover (Travel Alarms) 30 Cost of Goods Sold / Avg. Inventory 31 32 6.) Days in Inventory (Overall) 33 365 / Inventory Turnover 34 35 6.a.) Days in Inventory (DVD Players) 36 365/Inventory Turnover 37 38 6.b.) Days in Inventory (Travel Alarms) 39 365/Inventory Turnover 40 41 7.) Accounts Receivable Turnover 42 Net Credit Sales / Avg. Accounts Receivable 43 44 8.) Avg, Collection Period 45 365/ Accounts Receivable Turnover 46 47 9.) Return on Assets 48 Net Income / Avg Total Assets 49 50 10.) Times Interest Earned CA Case Assignment Bleache Horizontal Vertical XIV KPI Ratios Interim Audit Fi ABC Electronics Project: Analytical Review Procedures It is January 2018 and you are a staff accountant assigned to the 2017 audit of ABC Electronics. ABC is a closely held corporation managed by the founder and principal shareholder. Adam B. Clark. Your firm has audited ABC for the last five years. The audited financial statements for the years ended December 31, 2016 and 2015 are presented below, with the client's unaudited financial statements for 2017. Additional Information: ABC manufactures and sells DVD players and travel alarm clocks. All sales are on credit to department stores and electronics wholesaling companies. Credit terms are net 30 days. ABC offers a one-year warranty covering manufacturing defects. ABC uses a periodic inventory system and determines its year-end inventory by taking a physical count on December 31. You and your supervisor observed the count on December 31, 2017 and performed numerous test counts, but you have not performed further audit tests regarding inventory. The interest rate on all debt is 8 percent. Annual interest and principal payments ce due each December 1. Average Common Shares Outstanding is 10,000 for each year. INCOME STATEMENTS (5000's) C INCOME STATEMENTS (5000's) Years ended December 31 Sales Cost of goods sold Selling and general expenses Depreciation expense Warranty expense Bad debt expense Legal fees Interest expense Income tax expense Net Income Dividends paid E $ $ $ F 2017 7.750 $ 5,505 2.245 1,671 46 75 90 13 110 240 71 169 $ 125 S G 2016 7.713 S 5,381 2.332 1.622 55 65 85 14 127 364 109 255 $ 125 S H 2015 7,493 5.225 2.268 1,577 49 55 90 12 135 350 104 246 100 The following schedule shows the sales revenue and components of costs of goods sold for each of ABC's two products. B C E F G The following schedule shows the sales revenue and components of costs of goods sold for each of ABC's two products. SCHEDULES OF GROSS PROFIT (S000's) Years ended December 31 DVD Players Sales Cost of goods sold: Mil Labor OH Variance Depreciation Gross Profit Travel alarm clocks Sales Cost of goods sold: Mil Labor OH Variance Depreciation Gross Profit $ $ $ $ 2017 4.880 1.895 1,103 689 3 50 3.740 1,140 $. 2.870 $ 888 537 301 (2) $ 4.932 S 41 2016 1.835 1,074 664 5 70 3,648 1.284 $ 2.781 868 532 276 (3) 60 $ 1.765 1.733 1,105 $ 1.048 $ N 2015 4,791 Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to int 1,781 1.043 662 (4) 68 3.550 1.241 2,702 840 505 270 2 58 1,675 1.027 B Gross Profit C BALANCE SHEETS (S000's) December 31 Cash Accounts receivable Allowance for Doubtful Acets Inventories: Raw Materials Finished Goods: Prepaid expenses E Land Building and equipment Accumulated Depr. Total assets Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to inventory, a factor for depreciation is added to the material-labor-overhead standard to determine the inventory carrying cost. DVD players Travel alarms $ Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt $ S F $ 1.105 S 2017 36 $ 795 (70) 322 863 405 8 2.359 450 1,865 G 787 $ 16 1.048 S 40 100 943 2016 165 $ 674 (60) 304 738 390 2 (895) (790) 3,779 S 3.731 $ 2.213 450 1,858 675 $ 14 10 40 H 1,027 100 839 2015 77 658 (60) 286 710 374 4 2.049 450 1,831 (610) 3,720 694 13 11 40 100 858 B Prepare a Horizontal (Trend) Analysis of the Balance Sheet and Income Statement for E F H Land Building and equipment Accumulated Depr. Total assets Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt Long-term debt Paid-in-capital Retained earnings Total liabilities and equity S $ $ 2,359 450 1,865 (895) 3,779 S 787 S 16 H 40 100 943 1.300 2.243 550 986 1,536 3,779 $ 2.213 450 1,858 (790) 3.731 $ 675 10 40 100 839 1.400 2.239 550 942 1,492 3,731 $ . 2,049 450 1.831 (610) 3,720 694 13 11 40 100 858 1,500 2,358 550 812 1,362 3.720 3 ABC Electronics. KPI Ratios Listing December 31, 2017 1.) Current Ratio 6 Current Assets/Current Liabilities 2.) Working Capital 9 Current Assets - Current Liabilites 11 3.) Earnings Per Share 12 (Net Income - Preferred Dividends) / Avg. Common Shares Outstanding 14 4.) Gross Profit % (Overall) 15 Gross Profit/Net Sales 16 17 4.a.) Gross Profit % (DVD Players) 18 Gross Profit/ Net Sales 19 20 4.b.) Gross Profit % (Travel Alarms) 21 Gross Profit/Net Sales 22 23 5.) Inventory Turnover (Overall) 24 Cost of Goods Sold / Avg. Inventory 25 26 5.a.) Inventory Turnover (DVD Players) 27 Cost of Goods Sold / Avg. Inventory 28 29 5.b.) Inventory Turnover (Travel Alarms) B 2017 Fase Assignment Horizontal Vertical KPI Ratios Interim Audit Findings 2016 Follow-up Needed? + 1 K Audit Implication 22 23 5.) Inventory Turnover (Overall) 24 Cost of Goods Sold / Avg. Inventory 25 26 5.a.) Inventory Turnover (DVD Players) 27 Cost of Goods Sold / Avg. Inventory 28 A 29 5.b.) Inventory Turnover (Travel Alarms) 30 Cost of Goods Sold / Avg. Inventory 31 32 6.) Days in Inventory (Overall) 33 365 / Inventory Turnover 34 35 6.a.) Days in Inventory (DVD Players) 36 365/Inventory Turnover 37 38 6.b.) Days in Inventory (Travel Alarms) 39 365/Inventory Turnover 40 41 7.) Accounts Receivable Turnover 42 Net Credit Sales / Avg. Accounts Receivable 43 44 8.) Avg, Collection Period 45 365/ Accounts Receivable Turnover 46 47 9.) Return on Assets 48 Net Income / Avg Total Assets 49 50 10.) Times Interest Earned CA Case Assignment Bleache Horizontal Vertical XIV KPI Ratios Interim Audit Fi ABC Electronics Project: Analytical Review Procedures It is January 2018 and you are a staff accountant assigned to the 2017 audit of ABC Electronics. ABC is a closely held corporation managed by the founder and principal shareholder. Adam B. Clark. Your firm has audited ABC for the last five years. The audited financial statements for the years ended December 31, 2016 and 2015 are presented below, with the client's unaudited financial statements for 2017. Additional Information: ABC manufactures and sells DVD players and travel alarm clocks. All sales are on credit to department stores and electronics wholesaling companies. Credit terms are net 30 days. ABC offers a one-year warranty covering manufacturing defects. ABC uses a periodic inventory system and determines its year-end inventory by taking a physical count on December 31. You and your supervisor observed the count on December 31, 2017 and performed numerous test counts, but you have not performed further audit tests regarding inventory. The interest rate on all debt is 8 percent. Annual interest and principal payments ce due each December 1. Average Common Shares Outstanding is 10,000 for each year. INCOME STATEMENTS (5000's) C INCOME STATEMENTS (5000's) Years ended December 31 Sales Cost of goods sold Selling and general expenses Depreciation expense Warranty expense Bad debt expense Legal fees Interest expense Income tax expense Net Income Dividends paid E $ $ $ F 2017 7.750 $ 5,505 2.245 1,671 46 75 90 13 110 240 71 169 $ 125 S G 2016 7.713 S 5,381 2.332 1.622 55 65 85 14 127 364 109 255 $ 125 S H 2015 7,493 5.225 2.268 1,577 49 55 90 12 135 350 104 246 100 The following schedule shows the sales revenue and components of costs of goods sold for each of ABC's two products. B C E F G The following schedule shows the sales revenue and components of costs of goods sold for each of ABC's two products. SCHEDULES OF GROSS PROFIT (S000's) Years ended December 31 DVD Players Sales Cost of goods sold: Mil Labor OH Variance Depreciation Gross Profit Travel alarm clocks Sales Cost of goods sold: Mil Labor OH Variance Depreciation Gross Profit $ $ $ $ 2017 4.880 1.895 1,103 689 3 50 3.740 1,140 $. 2.870 $ 888 537 301 (2) $ 4.932 S 41 2016 1.835 1,074 664 5 70 3,648 1.284 $ 2.781 868 532 276 (3) 60 $ 1.765 1.733 1,105 $ 1.048 $ N 2015 4,791 Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to int 1,781 1.043 662 (4) 68 3.550 1.241 2,702 840 505 270 2 58 1,675 1.027 B Gross Profit C BALANCE SHEETS (S000's) December 31 Cash Accounts receivable Allowance for Doubtful Acets Inventories: Raw Materials Finished Goods: Prepaid expenses E Land Building and equipment Accumulated Depr. Total assets Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to inventory, a factor for depreciation is added to the material-labor-overhead standard to determine the inventory carrying cost. DVD players Travel alarms $ Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt $ S F $ 1.105 S 2017 36 $ 795 (70) 322 863 405 8 2.359 450 1,865 G 787 $ 16 1.048 S 40 100 943 2016 165 $ 674 (60) 304 738 390 2 (895) (790) 3,779 S 3.731 $ 2.213 450 1,858 675 $ 14 10 40 H 1,027 100 839 2015 77 658 (60) 286 710 374 4 2.049 450 1,831 (610) 3,720 694 13 11 40 100 858 B Prepare a Horizontal (Trend) Analysis of the Balance Sheet and Income Statement for E F H Land Building and equipment Accumulated Depr. Total assets Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt Long-term debt Paid-in-capital Retained earnings Total liabilities and equity S $ $ 2,359 450 1,865 (895) 3,779 S 787 S 16 H 40 100 943 1.300 2.243 550 986 1,536 3,779 $ 2.213 450 1,858 (790) 3.731 $ 675 10 40 100 839 1.400 2.239 550 942 1,492 3,731 $ . 2,049 450 1.831 (610) 3,720 694 13 11 40 100 858 1,500 2,358 550 812 1,362 3.720 3 ABC Electronics. KPI Ratios Listing December 31, 2017 1.) Current Ratio 6 Current Assets/Current Liabilities 2.) Working Capital 9 Current Assets - Current Liabilites 11 3.) Earnings Per Share 12 (Net Income - Preferred Dividends) / Avg. Common Shares Outstanding 14 4.) Gross Profit % (Overall) 15 Gross Profit/Net Sales 16 17 4.a.) Gross Profit % (DVD Players) 18 Gross Profit/ Net Sales 19 20 4.b.) Gross Profit % (Travel Alarms) 21 Gross Profit/Net Sales 22 23 5.) Inventory Turnover (Overall) 24 Cost of Goods Sold / Avg. Inventory 25 26 5.a.) Inventory Turnover (DVD Players) 27 Cost of Goods Sold / Avg. Inventory 28 29 5.b.) Inventory Turnover (Travel Alarms) B 2017 Fase Assignment Horizontal Vertical KPI Ratios Interim Audit Findings 2016 Follow-up Needed? + 1 K Audit Implication 22 23 5.) Inventory Turnover (Overall) 24 Cost of Goods Sold / Avg. Inventory 25 26 5.a.) Inventory Turnover (DVD Players) 27 Cost of Goods Sold / Avg. Inventory 28 A 29 5.b.) Inventory Turnover (Travel Alarms) 30 Cost of Goods Sold / Avg. Inventory 31 32 6.) Days in Inventory (Overall) 33 365 / Inventory Turnover 34 35 6.a.) Days in Inventory (DVD Players) 36 365/Inventory Turnover 37 38 6.b.) Days in Inventory (Travel Alarms) 39 365/Inventory Turnover 40 41 7.) Accounts Receivable Turnover 42 Net Credit Sales / Avg. Accounts Receivable 43 44 8.) Avg, Collection Period 45 365/ Accounts Receivable Turnover 46 47 9.) Return on Assets 48 Net Income / Avg Total Assets 49 50 10.) Times Interest Earned CA Case Assignment Bleache Horizontal Vertical XIV KPI Ratios Interim Audit Fi