The Fieldwork for the December 31, 2018 Audit of Schmidt

question 108

Short Answer

The fieldwork for the December 31, 2018 audit of Schmidt Corporation ended on March 17, 2019. The financial statements and auditor's report were issued on March 29, 2019. In each of the material situations (1 through 5) below, indicate the appropriate action (a, b, c). The possible actions are as follows
a. Adjust the December 31, 2018 financial statements.
b. Disclose the information in a footnote in the December 31, 2018 financial statements.
c. No action is required.
The situations are as follows:
________ 1. On March 1, 2019, one of Schmidt Corporation's major customers declared bankruptcy. The customer's financial condition in 2018 was deteriorating and they owed Schmidt Corporation a large sum of money as of the balance sheet date.
________ 2. On February 17, 2019, Schmidt Corporation sold some machinery for its book value.
________ 3. On February 20, 2019 a flood destroyed the entire uninsured inventory in one of Schmidt's warehouses.
________ 4. On January 5, 2019, there was a significant decline in the market value of the securities held for resale from their value as of the balance sheet date.
________ 5. On March 10, 2019, the company settled a lawsuit at an amount significantly higher than the amount recorded as a liability on the books as of the balance sheet date.

Determine the due date, interest, and maturity value of notes receivable.

Understand the focus and financial statement emphasis of different methods of estimating bad debts.

Accurately journalize transactions involving notes receivable, including accruing interest and recording payment.

Understand the methodology and calculation of accounts receivable turnover and days' sales in receivables.

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Definitions:

Sample Size

The number of observations or data points that are included in a sample for analysis.

Standard Deviation

A measure of the dispersion or variation in a set of values, indicating how spread out the values are from the mean.

Confidence Level

The likelihood that a confidence interval encompasses the actual population parameter.

Sample Size

The number of observations or specimens collected for the purpose of statistical analysis.