You can receive a contingent fee for preparing a tax return based on the size of the client”s refund. True or false? True. Incorrect. Tax preparation is not a situation in which a contingent fee can be charged. False. Correct. A contingent fee cannot be charged for tax return preparation. A contingent fee can be charged only in certain limited situations, including services in connection […]

Anders Corporation has issued 100,000 shares of $5 par value common stock. It authorized 500,000 shares. The paid-in capital in excess of par on the common stock is $240,000. The corporation has reacquired 7,000 shares at a cost of $46,000 and is currently holding those shares. Treasury stock was reissued in prior years for $47,000 more than its cost. The corporation also has 2,000 shares […]

A taxpayer requests records from a preparer that must be attached to his tax return. He has not paid the preparation fees yet. If state law permits retention of client records in cases of nonpayment of fees, the preparer may retain the taxpayer”s records. True or false? True. Incorrect. You must turn over records needed to be attached to a tax return, regardless of outstanding […]

Andrea has prepared the following list of statements about corporations. A corporation is an entity separate and distinct from its owners. As a legal entity, a corporation has most of the rights and privileges of a person. Most of the largest U.S. corporations are privately held corporations. Corporations may buy, own, and sell property; borrow money; enter into legally binding contracts; and sue and be […]

A retail business has cash sales of £100,000, the cost of sales for which was £35,000. Salaries of £15,000, rental of £4,000 and advertising of £8,000 have been paid in cash. The owners have contributed equity of £25,000. In addition, the business paid cash of £40,000 for stock and purchased equipment on credit for £20,000. The financial statements of the business would show: a. Profit […]

As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. LR Corporation is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 5,000 shares of its $20 par value common stock. The owners’ asking price for the land was $120,000, and the fair value of […]

The following balances are shown in alphabetical order in a professional service firm’s accounting system at the end of a financial year: £ Advertising 15,000 Bank 5,000 Equity 71,000 Income 135,000 Equipment 100,000 Payables 11,000 Receivables 12,000 Rent 10,000 Salaries 75,000 Calculate: a. the profit for the year b. the equity at the end of the year

On January 1, 2014, the stockholders’ equity section of Newlin Corporation shows common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and retained earnings $1,200,000. During the year, the following treasury stock transactions occurred. Mar. 1 Purchased 50,000 shares for cash at $15 per share. July 1 Sold 10,000 treasury shares for cash at $17 per share. Sept. 1 Sold 8,000 […]

For each of the following transactions, identify whether there is an increase or decrease in profit, cash flow, assets or liabilities. Profit Income — Assets Transaction Expenses Cash Flow (excluding cash) Liabilities Issues shares to public Borrows money over 5 years Pays cash for equipment Buys inventory on credit Sells goods on credit Pays cash for salaries, rent, etc. Pays cash to suppliers Receives cash […]

Let”s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts: Cash = $5 million Government securities = $7 million Mortgage loans = $30 million Other loans = $50 million Fixed assets = $10 million Intangible assets = $4 million Loan-loss reserves = $5 million Owners” equity = $5 million Trust-preferred securities = $3 million Cash assets […]