Audit homework
You are reviewing property, plant and equipment working papers of Mandville Corporation, a company that publishes travel guides. The following is the lead schedule K-1: THE MANDVILLE CORPORATION K-1 Summary of Property, Plant, and Equipment and Accumulated Depreciation December 31, 200(2 Assets Accumulated Depreciation Account Balance Balance Balance Balance Number Description 231X1 Additions Retirements 123102 Method Rate 1231X1 Provision Retirements 12/31X2 151 Land 500,000 Y 151,000 651000 152-3 Land Improv. 135,000 Y 10,000 145,000 SL. 51 13.500 Y 7,000 20.500 154- Buildings 4.500,000 Y 495,000 4,995,000 TS 3% 292,000 Y 142 420 434 420 156-7 Equipment 800,000 Y 10.000 60 000 850,000 SL 235,000 Y 70,600 50.600 295,000 TOTALS 5,935,000 765,000 60.000 6,641000 540.500 220,020 50 600 709.920 K-1-1 K K-1-2 K-1-1 K Y Agreed to prior year work papers. Footed plant and equipment subsidiary ledger cards. No exceptions. Conclusion: As a result of our audit procedures for property, plant, and equipment and related depreciation, it is our opinion that the 12/31/X2 balances are fairly stated. VMH CMW 1/17/X3 1/25/X3The following detail changes in the account: I. Land: The addition represents the purchase of land adjacent to the company's existing plant and is nanced as follows: Contract sales price2.0m shares of Mandirille Corporation Common Stock Liabilities assumed by Mandville Accrued county taxes at settlement date teem} Unpaid sewer installation assessment {b.4100} [in June 11'. the date on which the buyer and seller discussed the transaction. shares of Mandirille Corporation stock were selling for FISH. On June 311 the settlement date (day of the sale]. Mahdville stock. was selling for $T per share. The jounial entrf,r for the purchase was recorded as: Land $151.0DD Common Stock $ 201004} Paid-in capital in excess of par 120.000 Accrued taxes payable 4,5013 Accrued sewer assessment papa hle EACH] 2. [had impioiemcnrs: This account was increased by three journal entries {each recorded with a debit to land improvements and a credit to cash]I during the year. Each of these improvements relates to the new land that was purchased in point {I} above. Sidewalk to building $2,500 Repaving of road to building 3,500 Chain link fence (replaces rusted chain link fence surrounding property) 4,000 3. Building: The building was constructed by an independent contractor; the contract was for $473,000. Progress payments were made during construction through use of proceeds of a bank loan, for which the building serves as collateral. The interest during construction was capitalized ($22,000), while the interest subsequent to construction but prior to year-end ($20,000) was expensed.Auditing: Fixed Asset section Account | Asset Depreciation Depreciation Add: Less: Depreciation Depreciation | Difference rate on beginning Depreciation Depreciation per Audit per K-1 balance on additions on Retirements 152-3 Land 5% Improvements Comments: 152-5 Building 3% Comments: 156-7 Equipment 10% Comments: Total Overall Conclusion and Suggested Additional Testing:Auditing: Fixed Asset Section 4. Equipment: The change in the equipment was a trade of old book "update printing equipment" for two new computer servers and associated software that will maintain electronic updates. Until recently, updates of outdated portions of guidebooks were printed and "shrinkwrapped" with the guidebook. Now the updates will be available on Mandville's website. The old equipment had a cost of $60.000 and accumulated depreciation of $50,600 and was worth approximately its book value of $9,400. although the salesperson suggested that he was providing the company a $19,400 trade-in value. Accordingly, the following entry was made to record the exchange: Equipment-computer servers $110,000 Accumulated Depr. (old equipment) 50,600 Cash $90,600 Equipment-printing equipment 60,000 Gain on exchange of assets 10,000 5. Depreciation provisions: Mandville uses software to calculate depreciation to the exact day.
