Auditing: Revenue and Expense Forecast

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ACC 235: Auditing
EXHIBIT 4.53
Dunder-Mifflin, Inc., Prior Year (Audited),
Forecast Current Year, Current Year Actual (Unaudited)

Prior yearForecastCurrent Year
Revenue and Expense:

Sales (net)$9,000,000 $9,900,000 $9,720,000
Cost of Goods Sold6,296,0006,926,0007,000,000
Gross Margin2,704,0002,974,0002,720,000
General Expense2,044,0002,000,0002,003,000
Depreciation300,000334,000334,000
Operating Income$360,000 $640,000 $383,000
Interest Expense60,000110,00075,000
Income Taxes (40%)120,000212,000123,200
Net Income$180,000 $318,000 $184,800

Assets:
Cash$600,000 $880,000 $690,800
Accounts Receivable500,000600,000900,000
Allowance for Doubtful Accounts-40,000-48,000-90,000
Inventory1,500,0001,500,0001,350,000
Total Current Assets$2,560,000 $2,932,000 $2,850,800
Fixed Assets3,000,0004,700,0004,500,000
Accumulated Depreciation-1,500,000-1,834,000-1,834,000
Total Assets$4,060,000 $5,798,000 $5,516,800

Liabilities and Equity:
Accounts Payable$450,000 $450,000 $330,000
Bank Loans, 8%01,750,0001,750,000
Accrued Interest60,00040,00040,000
Accuruals and Other50,00060,00032,000
Total Current Liabilities$560,000 $2,300,000 $2,152,000
Long-Term Debt, 10%600,000400,000400,000
Total Liabilities$1,160,000 $2,700,000 $2,552,000
Capital Stock2,000,0002,000,0002,000,000
Retained Earnings900,0001,098,000964,800
Total Liabilites and Equity$4,060,000 $5,798,000 $5,516,800

4.53 AUDIT SIMULATION: Preliminary Analytical Procedures. Dunder-Mifflin, Inc. wanted to expand its manufacturing and sales facilities. The company applied for a loan from First Bank, presenting the prior- year audited financial statements and the forecast for the current year shown in Exhibit 4.53 above. (The company's fiscal year-end is December 31.) The bank was impressed with the business prospects and granted a $1,750,000 loan...
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