You were engaged for the first time to audit the FS of Bebeko Corporation for the...

 

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You were engaged for the first time to audit the FS of Bebeko Corporation for the period ended December 31, 2020. The company started its operation in 2018. In reviewing the books, the auditor discovered that certain adjustments had either been overlook or improperly recorded at the end of years to 2020. Omissions and other failures for each year are summarized below: 1. Omissions of the following year-end accruals/deferrals: a. Accrued utilities expense b. Accrued interest income c. Prepaid rent expense d. Unearned royalty income 2. Delivery of merchandise at year-end to customers, recorded as sales upon collection the following year. 3. Receipt of merchandise at year-end from suppliers, recorded as purchases upon payment the following year. 4. Cash received from customers at year-end, recorded as sales deliveries yet to be made the following year. In the year of collection, corresponding inventories at cost were included in the physical count. 5. Payments to suppliers at year-end for goods to be received the following year, under FOB Destination, recorded as purchases upon payment. Inventories were included in physical count at the year when these were received. 6. Overstatement in year-end inventories 7. Understatement in year-end inventories 8. Organization costs incurred in the start-up of the business at the beginning of 2018 was capitalized by the company as an intangible asset and has been amortized by 5 years. 9. Major repairs on the company's equipment were recognized as outright expenses. The company depreciates equipment at 20% per annum, but depreciation in the year of the expenditure is at 10% The company's books also revealed the following information: 2018 5000 2000 8000 5000 3000 9000 50000 December 31 2019 7000 4000 2000 6000 2000 4000 2020 6000 3000 1000 3000 10000 3000 5000 1000 7000 35000 40000 Retained earnings Profit Dividends declared and distributed Compute for the following: 1. Adjusted profit for 2018 2. Adjusted profit for 2019 3. Adjusted profit for 2020 4. Retained earnings balance, 2018 5. Retained earnings balance, 2019 6. Retained earnings balance, 2020 2018 325,000 345,000 110,000 2019 691,000 586,000 130,000 2020 1,001,000 460,000 150,000 You were engaged for the first time to audit the FS of Bebeko Corporation for the period ended December 31, 2020. The company started its operation in 2018. In reviewing the books, the auditor discovered that certain adjustments had either been overlook or improperly recorded at the end of years to 2020. Omissions and other failures for each year are summarized below: 1. Omissions of the following year-end accruals/deferrals: a. Accrued utilities expense b. Accrued interest income c. Prepaid rent expense d. Unearned royalty income 2. Delivery of merchandise at year-end to customers, recorded as sales upon collection the following year. 3. Receipt of merchandise at year-end from suppliers, recorded as purchases upon payment the following year. 4. Cash received from customers at year-end, recorded as sales deliveries yet to be made the following year. In the year of collection, corresponding inventories at cost were included in the physical count. 5. Payments to suppliers at year-end for goods to be received the following year, under FOB Destination, recorded as purchases upon payment. Inventories were included in physical count at the year when these were received. 6. Overstatement in year-end inventories 7. Understatement in year-end inventories 8. Organization costs incurred in the start-up of the business at the beginning of 2018 was capitalized by the company as an intangible asset and has been amortized by 5 years. 9. Major repairs on the company's equipment were recognized as outright expenses. The company depreciates equipment at 20% per annum, but depreciation in the year of the expenditure is at 10% The company's books also revealed the following information: 2018 5000 2000 8000 5000 3000 9000 50000 December 31 2019 7000 4000 2000 6000 2000 4000 2020 6000 3000 1000 3000 10000 3000 5000 1000 7000 35000 40000 Retained earnings Profit Dividends declared and distributed Compute for the following: 1. Adjusted profit for 2018 2. Adjusted profit for 2019 3. Adjusted profit for 2020 4. Retained earnings balance, 2018 5. Retained earnings balance, 2019 6. Retained earnings balance, 2020 2018 325,000 345,000 110,000 2019 691,000 586,000 130,000 2020 1,001,000 460,000 150,000