Sorenson manufacturing corporation eas incorporated on Jan, 3 2013. The corporation financial…


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Sorenson manufacturing corporation eas incorporated on Jan, 3 2013. The corporation financial… 1 answer below » Sorenson manufacturing corporation eas incorporated on Jan, 3 2013. The corporation financial statement for its fist year operation was not examined by a CPA. You have been engaged to audit the financial statement for the year ended December 31, 2014, and your work is substantially completed. A partial trail balance of the company accounts follows:Dr. CrCash $11,000Accounts receivable 42,500Allowable for doubtful debt $500Inventories 38,500Machinery 75,000Equipment 29,000Accumulated depreciation 10,000Patents 85,000Leasehold 26,000Prepaid expenses 10,500Organizational expenses 29,000Goodwill 2 View complete question » Sorenson manufacturing corporation eas incorporated on Jan, 3 2013. The corporation financial statement for its fist year operation was not examined by a CPA. You have been engaged to audit the financial statement for the year ended December 31, 2014, and your work is substantially completed. A partial trail balance of the company accounts follows:Dr. CrCash $11,000Accounts receivable 42,500Allowable for doubtful debt $500Inventories 38,500Machinery 75,000Equipment 29,000Accumulated depreciation 10,000Patents 85,000Leasehold 26,000Prepaid expenses 10,500Organizational expenses 29,000Goodwill 24,000Licensing Agreement No. 1 50,000Licensing Agreement No. 2 49,000The following information relates to accounts that may yet require adjustment1. Patents s for Sorenson’s manufacturing process ware purchase Jan 2, 2014, at a cost of $68,000. An additional $17,000 was spent in December 2012 to improve machinery covered by the patent and charged to the Patents account. The Patent had a remaining legal term of 17yrs2. In December 2013 an explosion include a permanent 60% reduction in the expected revenue producing value of licensing agreement no. 1 and in Jan 2014, a flood cause additional damage which rendered the agreement worthless3. A study of Licensing Agreement No. 2 made by Sorenson on Jan 2014 revealed that its estimated remaining life expectancy was only 10 yrs as of an. 1, 20144. The balance in the Goodwill accounts included $24,000 paid December 30,2013, for an advertising program which is estimated will assist in increasing Sorenson sales over a period of 4yrs following the disbursement5. The Leasehold improvement accounts included a) the $15,000 cost of improvements with s total estimated useful life of 12yrs, which Sorenson, as tenant made to leased premises in Jan 2013 b. movable assemble-line equipment costing $8,500 which was installed in the leased premises in Dec 2014 and c) real estate taxed of $2,500 paid by Soreson which under the terms of the lease should have been paid by the landlords. Sorenson paid its rent in full during 2014. A 10-year nonrenewable lease was signed Jan. 3, 2013 for the lease building that Sorenson used in manufacturing operations6. The balance in the organization expenses accounts includes pre operating cost incurred during the organizations periodRequiredFor each of the items 1-7:a. Prepare adjustment entries as necessaryb. Identify the substantive audit procedures you would perform to test the transaction View less » Jan 31 2016 09:00 PM

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