Your firm was hired by Worldwide Wholesalers (WWW), a distributor of wholesale items to all parts...

 

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Your firm was hired by Worldwide Wholesalers (WWW), a distributor of wholesale items to all parts of the world, to perform the audit for WWW. The company has numerous distribution centers throughout the United States and other countries. The company provided the following information that is pertinent to this case. WWW's headquarters are located at: 53 W. River Parkway, Minneapolis, MN 55401. WWW has a fiscal year end (FYE) of April 30. (The Fiscal Year is May 1 - April 30, 20xx) • The company has all the Cash in one bank account at Third National Bank of St. Paul; however, $2,000 of the Cash is segregated for the liquidation of long-term debts. The company has a 7% Note payable due September 20xx. • The company has an 8% debt due July 20xx. WWW is planning on reporting the following balance sheet information ($ in millions) for this FYE: o Cash $12,031 o Total Current Assets $32,111 $75,083 $29,270 ● O Total Assets O Accounts Payable and Accruals O 7% Note Payable and 8% Long-term Debt maturing in 20xx O Long-term Debt, less debt maturing in 20xx O Shareholders' Equity $ 7,805 $17,321 $20,687 On May 30, 20xx, an $8,000, 5%, 10-year loan was agreed to with Third National Bank of St. Paul, MN. Annual payments are due on the loan beginning June 1, of next year. The majority of the loan was used to refinance the 7% Note Payable and the 8% Long-term Debt maturity on a Long-Term Basis. The remaining funds were used to purchase some new machinery. The FYE Financial Statements need to be completed by June 29, 20xx, for submission to the public. As a Senior Auditor you have reviewed the Current and Long-term Assets and Liabilities of WWW. You believe that some of the Cash and Liability classifications are not correct. You have discussed your concerns with Marion Marin, Controller for WWW. Marion stated that all cash is classified as a current asset because it is most liquid even though some of the cash is restricted for long-term debt obligations. Marion also said that liabilities are reported as current or long-term based on the terms of the agreement at the time the financial statements are completed, regardless of future events, even if those events have already occurred. You stated that you do not think this is correct and will research your concerns. You told Marion that you will provide information on your findings. Specifically, how Cash & Restricted Cash and Liabilities should be reported on the FYE Balance Sheet and any necessary Disclosures that WWW is required to make given the information stated above. Required: You work for The Ignatius Group, CPAS (TIG) located at: 2098 Fairways Lane, Roseville, MN 55113. Draft a letter (the date of the letter is the actual day you write the letter) addressed to Marion Marin, Controller, evaluating WWW's Balance Sheet classifications and disclosures showing the correct reporting on the FYE financial statements. Include a discussion and specific recommendations of how WWW should report the information noted above. (You should include specific guidance) Include in your discussion specific and complete references to accounting pronouncements that you used to formulate the basis of your recommendation. You need to go to the FASB Codification site for your research of this case. (You should Your firm was hired by Worldwide Wholesalers (WWW), a distributor of wholesale items to all parts of the world, to perform the audit for WWW. The company has numerous distribution centers throughout the United States and other countries. The company provided the following information that is pertinent to this case. WWW's headquarters are located at: 53 W. River Parkway, Minneapolis, MN 55401. WWW has a fiscal year end (FYE) of April 30. (The Fiscal Year is May 1 - April 30, 20xx) • The company has all the Cash in one bank account at Third National Bank of St. Paul; however, $2,000 of the Cash is segregated for the liquidation of long-term debts. The company has a 7% Note payable due September 20xx. • The company has an 8% debt due July 20xx. WWW is planning on reporting the following balance sheet information ($ in millions) for this FYE: o Cash $12,031 o Total Current Assets $32,111 $75,083 $29,270 ● O Total Assets O Accounts Payable and Accruals O 7% Note Payable and 8% Long-term Debt maturing in 20xx O Long-term Debt, less debt maturing in 20xx O Shareholders' Equity $ 7,805 $17,321 $20,687 On May 30, 20xx, an $8,000, 5%, 10-year loan was agreed to with Third National Bank of St. Paul, MN. Annual payments are due on the loan beginning June 1, of next year. The majority of the loan was used to refinance the 7% Note Payable and the 8% Long-term Debt maturity on a Long-Term Basis. The remaining funds were used to purchase some new machinery. The FYE Financial Statements need to be completed by June 29, 20xx, for submission to the public. As a Senior Auditor you have reviewed the Current and Long-term Assets and Liabilities of WWW. You believe that some of the Cash and Liability classifications are not correct. You have discussed your concerns with Marion Marin, Controller for WWW. Marion stated that all cash is classified as a current asset because it is most liquid even though some of the cash is restricted for long-term debt obligations. Marion also said that liabilities are reported as current or long-term based on the terms of the agreement at the time the financial statements are completed, regardless of future events, even if those events have already occurred. You stated that you do not think this is correct and will research your concerns. You told Marion that you will provide information on your findings. Specifically, how Cash & Restricted Cash and Liabilities should be reported on the FYE Balance Sheet and any necessary Disclosures that WWW is required to make given the information stated above. Required: You work for The Ignatius Group, CPAS (TIG) located at: 2098 Fairways Lane, Roseville, MN 55113. Draft a letter (the date of the letter is the actual day you write the letter) addressed to Marion Marin, Controller, evaluating WWW's Balance Sheet classifications and disclosures showing the correct reporting on the FYE financial statements. Include a discussion and specific recommendations of how WWW should report the information noted above. (You should include specific guidance) Include in your discussion specific and complete references to accounting pronouncements that you used to formulate the basis of your recommendation. You need to go to the FASB Codification site for your research of this case. (You should

Answer rating: 100% (QA)

The Ignatius Group CPAs 2098 Fairways Lane Roseville MN 55113 July 1 20xx Marion Marin Controller Wo... View the full answer