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Nata [24]
3 years ago
7

You are engaged to examine the financial statements of Spillane Company for the year ended December 31. Assume that on November

1, Spillane borrowed $500,000 from Second National Bank to finance plant expansion. The long-term note agreement provided for the annual payment of principal and interest over five years. The existing plant was pledged as security for the loan. Due to the unexpected difficulties in acquiring the building site, the plant expansion did not begin on time. To use the borrowed funds, management decided to invest in stocks and bonds and on November 16, invested the $500,000 in publicly traded securities. Required: Identify the relevant financial statement assertions for the publicly traded securities account (an asset) based on the PCAOB's five management assertions about the financial statements.
Business
1 answer:
lina2011 [118]3 years ago
6 0

Answer:

<u>Assertion 1)</u> Existence or occurrence: the company must provide the loan documents along with proof that they actually purchased the stocks and bonds using the loan money. It would also help to have a document explaining why the building site couldn't be acquired as planned.

<u>Assertion 2)</u> Rights and obligations: all the legal paperwork regarding the loan, the mortgage on the existing plant and the stocks and bond paperwork must be presented.

<u>Assertion 3)</u> Completeness: all the relevant information must be given to the auditor including building titles, inventories, equipment, cash receipts, etc. The auditor should be allowed to physically visit the plant and confirm the documents.

<u>Assertion 4)</u> Valuation and allocation: information regarding the current market values of the building, inventories and equipment should be given to the auditor. The auditor should be able to confirm if the depreciation values and market values are consistent. Also, the auditor must have access to accounts receivables and should be able to analyze them to check for any inconsistencies.

<u>Assertion 5)</u> Presentation and disclosure: the auditor should be able to check expense accounts and capitalization accounts, and analyze them. E.g. equipment or machinery repairs must be treated as expenses and not capitalized.

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Dennis_Churaev [7]

Answer:

The thief has a 0.11% probability of hitting the pin code on the first try.

Explanation:

Simply, if the ATM card has a 3-digit code that can be repeated, and the board has 9 numbers (for example, from 1 to 9), we must start from the smallest number that could be formed with these numbers to the highest number that these numbers could also compose, which in the case would be 111 and 999. Then, 889 different numbers could be formed (it is the distance between 111 and 999), with which the possibility of hitting the key to the first attempt would be 1 in 889 times, or 1/889.

To take the probability to a percentage, we must know that 889 / 8.89 gives 100. Therefore, dividing 1 / 8.89 we will know the percentage of probabilities of hitting the key on the first attempt: 1 / 8.89 = 0.11.

This shows us that the thief has a 0.11% probability of hitting the key on the first try.

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