Marino, who is a CPA, has performed an audit of Dolphins, Inc., for the fiscal year ending
Question:
Marino, who is a CPA, has performed an audit of Dolphins, Inc., for the fiscal year ending December 31, 20X0. Marino has been asked, as part of his engagement, to provide a report to Players Mortgage revealed that Dolphin's total assets are $20 million and the mortgage is $5 million. The major provisions of the mortgage indenture agreement are as follows. DOLPHINS, INC. MAJOR PROVISIONS OF MORTGAGE INDENTURE AGREEMENT WITH PLAYERS MORTGAGE COMPANY The current ratio must be 2.0 to 1 or higher. The debt to equity ratio must be 2.5 or lower. © Income after taxes must be at least $1.2 million more than the dividends declared and paid during the year. (b) The date of Marino's report on the financial statements is dated February 15, 20X1. Marino issued a standard, unmodified report on the financial statements.
REQUIRED:
- Write the report that Marino should prepare if all provisions of the mortgage indenture agreement have been met. How would the wording in the report have to be changed if income after taxes was $1.5 million and dividends paid were $400,000?
How would the report change if all provisions of the mortgage indenture agreement have been met, but there is a lawsuit against the company that has resulted in the disclosure of this lawsuit in the footnotes to the financial statements?
- No contingent liability has been recorded since the company does not believe that it is probable that the plaintiff in the suit will prevail.
Expert Answer:
1 Auditors Report relating to Compliance with Mortgage Indenture Agreement To Players Mortgage Compa... View the full answer
