Auditing HW 11-16-19.docx - FCC Auditing 54 Alex Leal...

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FCC - Auditing 54 Alex Leal Spencer Rotan Sal Garcia Group Assignment: 11-47 & 11-48 Problem 11-47 GRANITE CORPORATION 1. Contingent liability because a $50,000 note was issued to a client with unquestioned financial standing. This should be disclosed on all reporting. 2. Contingent liability because of Desert Sun Inc.’s current cash position and operations risk. The $60,000 note should be disclosed, along with the $80,000 advance that will also be issued to Desert Sun Inc. 3. The $20,000 note was written by an employee who no longer works there, and every indication shows it is not going to be recovered and should be in the financial statements as a loss. It should not be considered a contingent liability; it should be considered a current liability. The current liability should be presented in the balance sheet to show that it will be due within the year. Problem 11-48 AREOSPACE CONTRACTORS, INC Balance Sheet July 31, 20X0 Current Assets:
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Unformatted text preview: Accounts Receivable: Commercial, less allowance for uncollectible accounts $75,000 $542,000 US Government, including $320,000 claim under terminated contracts 3,502,000 Other Assets: Due from Harwood Co., investee 480,000 Trade receivable and Public Carriers receivable could be included under the Commercial Receivable account due to the amounts being immaterial. (i.e. $22K of $595K of commercial receivables) Allowance for uncollectible accounts and notes most closely relates to the Commercial account as well, so it is worth noting in the financials. U.S. Government transactions are substantial and should be reported on their own account for disclosure. This includes receivables for cancelled government contracts. Harwood Co’s investment should be tracked separately from current assets. Since the asset can be recalled or remain invested for an unknown amount of time....
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