PA1 - Assigmnment 1 CGA
Answer 1
A – 1
B – 1
C – 2
D – 4
E – 1
F – 3
G – 2
H – 2
I – 1
J – 1
Answer 2 MEMO
DATE: Sept 14, 2014
TO: Edward Sloane, Senior Audit Partner
FROM: XXXX, CPA, CGA
Subject:
I have been auditing Vehicles For Hope Limited (VHL) for the last five years, however during my recent meeting with the accountant I was informed of several changes that have taken place during the last one year. I am writing this memo to apprise you of these changes and seek your feedback on audit planning.
Significant Donations: Two months ago a long standing board member donated land, building and equipment to help VHL accept more applicants for the training. In addition to this he also made a cash donation of $ 300,000 earmarked for providing toolkits for graduating mechanics. The accountant was not sure of the treatment of these transactions and has therefore not recorded them. VHL uses the deferral method for accounting and follows the accounting for not-for profit organizations (part 111).
These donations are material transactions and not recording them in the financial statements and may result in a qualified audit report. Land and building should be recorded in the books at fair market value at the time of donation. The building should be amortized by estimating the remaining useful life. The $ 300,000 is an externally restricted contribution. The portion of this contribution used in current financial year should be shown as revenue and the remaining will be called a Deferred Contribution. These deferred contributions should be taken into revenue to match the expenditure on toolkits during that period. Since there is an encumbrance made on these amounts a special account should be created to track the use of these transactions.
I can provide my suggestions on the accounting treatment to the accountant however he will need to complete the accounting process before I can start the
A – 1
B – 1
C – 2
D – 4
E – 1
F – 3
G – 2
H – 2
I – 1
J – 1
Answer 2 MEMO
DATE: Sept 14, 2014
TO: Edward Sloane, Senior Audit Partner
FROM: XXXX, CPA, CGA
Subject:
I have been auditing Vehicles For Hope Limited (VHL) for the last five years, however during my recent meeting with the accountant I was informed of several changes that have taken place during the last one year. I am writing this memo to apprise you of these changes and seek your feedback on audit planning.
Significant Donations: Two months ago a long standing board member donated land, building and equipment to help VHL accept more applicants for the training. In addition to this he also made a cash donation of $ 300,000 earmarked for providing toolkits for graduating mechanics. The accountant was not sure of the treatment of these transactions and has therefore not recorded them. VHL uses the deferral method for accounting and follows the accounting for not-for profit organizations (part 111).
These donations are material transactions and not recording them in the financial statements and may result in a qualified audit report. Land and building should be recorded in the books at fair market value at the time of donation. The building should be amortized by estimating the remaining useful life. The $ 300,000 is an externally restricted contribution. The portion of this contribution used in current financial year should be shown as revenue and the remaining will be called a Deferred Contribution. These deferred contributions should be taken into revenue to match the expenditure on toolkits during that period. Since there is an encumbrance made on these amounts a special account should be created to track the use of these transactions.
I can provide my suggestions on the accounting treatment to the accountant however he will need to complete the accounting process before I can start the