Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that you are the auditor for Spring Green Company, a manufacturer of gardening tools. The year-end is December 31, 2021. The audit report date

image text in transcribed

Assume that you are the auditor for Spring Green Company, a manufacturer of gardening tools. The year-end is December 31, 2021. The audit report date is March 10,2022. The date the financial statements are issued is March 21,2022. Consider each of the following situations. Assume each transaction and amount is material. For each situation, determine the appropriate financial statement treatment, including the dollar amount, if Your choices are: A. Ask the client to adjust the 12-31-21 financial statements and disclose the information in a footnote B. Ask the client to disclose the information in a footnote in the 12-31-21 financial statements. C. No action is necessary. 1. On March 1, 2022, the auditor discovered that a customer of Spring Green had gone bankrupt. The customer owed an accounts receivable, in the amount of $4,000,000. Assume this amount is material. Also assume no allowance for uncollectible accounts has yet been set up related to this account. The last sale to the customer was made on June 29, 2021, and the last payment was received on September 15, 2021. The customer has been experiencing gradually worsening financial conditions. 2. On February 10,2022, the auditor discovered that a customer of Spring Green had gone bankrupt. The customer owed an account receivable, in the amount of $2,000,000. Assume this amount is material. Also assume no allowance for uncollectible accounts has yet been set up related to this account. The sale, which created this account receivable, was made on January 20,2022. The customer experienced a totally unexpected and devastating loss, which was not adequately insured. 3. On March 2,2022, the auditor discovered that a major subsidiary was to be sold. A buyer had been found. The purchase will be completed on July 15,2022

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Accounting

Authors: Floyd A. Beams, Robin P. Clement, Suzanne H. Lowensohn, Joseph H. Anthony

9th Edition

0131851225, 978-0131851221

More Books

Students also viewed these Accounting questions