\n<\/p>\n

<\/p>\n

Lancaster Electronics produces electronic components for sale to
\nmanufacturers of radios, television sets, and phonographic systems. In
\nconnection with his examination of Lancaster’s financial statements for
\nthe year ended December 31, 2011, Dan Olds, CPA, completed fieldwork two
\nweeks ago. Mr. Olds is now evaluating the significance of the following
\nitems for preparing his auditor\u2019s report. Except as noted, none of
\nthese items has been disclosed in the financials or footnotes.<\/p>\n

Recently, Lancaster interrupted its policy of paying cash
\ndividends quarterly to its stockholders. Dividends were paid regularly
\nthrough 2009, discontinued for all of 2010 to finance equipment in the
\ncompany\u2019s new plant, and resumed in the first quarter of 2011. In the
\nannual report, dividend policy is to be discussed in the president’s
\nletter to stockholders.<\/li>\n
A 10-year loan agreement, which the company entered into three years
\nago, provides that dividend payments may not exceed net income earned
\nafter taxes subsequent to the date of agreement. The balance of retained
\nearnings at the date of the loan agreement was $298,000. From that date
\nthrough December 31, 2011, income after taxes was totaled 360,000. Cash
\ndividends have totaled $130,000. Based on this data, the staff auditor
\nassigned to this review concluded that there was no retained earnings
\nrestriction at December 31, 2011.<\/li>\n
The company’s new manufacturing plant building, which cost $600,000
\nand has an estimated life of 25 years, is leased from the Sixth National
\nBank in annual rental of $100,000. The company is obligated to pay
\nproperty taxes, insurance, and maintenance. At conclusion of its 10-year
\nnon-cancellable lease, the company has the option of purchasing the
\nproperty for $1. In Lancaster\u2019s income statement, the rental payment is
\nreported on a separate line.<\/li>\n
A major electronics firm has introduced a line of products that will
\ncompete directly with Lancaster\u2019s primary line, which is now being
\nproduced in the specially designed new plant. Because of manufacturing
\ninnovations, a competitor’s line will be of comparable quality but
\npriced $.50 below Lancaster\u2019s line. The competitor announced its new
\nline during the week following completion of its fieldwork. Mr. Olds
\nread the announcement in the newspaper and discussed the situation by
\ntelephone with Lancaster executives. Lancaster will meet the lower
\nprices with prices that are high enough to cover viable manufacturing
\nand selling expenses but will permit recovery of only a portion of fixed
\ncosts.<\/li>\n<\/ol>\n
Required:<\/u><\/strong>
\nFor each of the preceding items, discuss any additional disclosures in
\nthe financial statements and footnotes that the auditor should recommend
\nto its clients which are outlined in Schroeder, R.G., Clark, M.W, &
\nCathey, J.M. (2013) Chapter 17. (The cumulative effect of the four items
\nshould not be considered.)<\/p>\n
Your well-written paper must be 2-3 pages, in addition to title and
\nreference pages. The paper should be formatted according to the apa standards Cite at least two peer-reviewed sources, in addition to the required reading for the module.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"
Lancaster Electronics produces electronic components for sale to manufacturers of radios, television sets, and phonographic systems. In connection with his examination of Lancaster’s financial statements for the year ended December 31, 2011, Dan Olds, CPA, completed fieldwork two weeks ago. Mr. Olds is now evaluating the significance of the following items for preparing his auditor\u2019s […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_joinchat":[]},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/165483"}],"collection":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/comments?post=165483"}],"version-history":[{"count":0,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/165483\/revisions"}],"wp:attachment":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/media?parent=165483"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/categories?post=165483"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/tags?post=165483"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}