Chapter 19Problem 1:California Surplus Inc. qualifies to use the installment-sales method for tax purposes and soldan investment on an installment basis

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Please find the questions in the attachment. Thank you.

Homework – Week 2 – Chapter 19Problem 1:California Surplus Inc. qualifies to use the installment-sales method for tax purposes and soldan investment on an installment basis. The total gain of $75000 was reported for financialreporting purposes in the period of sale. The installment period is 3 years; one-third of the saleprice is collected in 2014 and the rest in 2015 and 2016. The tax rate was 35% in 2014, 30% in2015, and 30% in 2016. The enacted tax rates of 2015 and 2016 are not known until 2015.The accounting and tax data are shown below.Financial AccountingTax Return2014 (35% tax rate)Income before temporary difference$175,000$175,000Temporary difference$75,000$25,000Income$250,000$200,0002015 (30% tax rate)Income before temporary difference$200,000$200,000Temporary difference$–$25,000Income$200,000$225,0002016 (30% tax rate)Income before temporary difference$180,000$180,000Temporary difference$–$25,000Income$180,000$205,000Required:1)Prepare the journal entries to record the income tax expense,deferred income taxes, and the income taxes payable for2014, 2015, and 2016. No deferred income taxes existed atthe beginning of 2012.2)Explain how the deferred taxes will appear on the balancesheet at the end of each year. (Assume Installment AccountsReceivable is classified as a current asset.)3)Show the income tax expense section of the income statementfor each year, beginning with “Income before income taxes.”
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Case # 5.2 . Heirloom photo plan. PLEASE ANSWER FOUR QUESTIONS AT THE END OF THE CASE, in two or three

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Case # 5.2 . Heirloom photo plan. PLEASE ANSWER FOUR QUESTIONS AT THE END OF THE CASE, in two or three

pages.

Please see the attach file. thanks.

CASE 5-2 Heirloom Photo PlansHeirloom Photos sells a $900 photography plan to rural customers using a commissioned sales force. Rather than pay the price up front, most customers pay $250 down and make 36 monthly payments of $25 each. The$900 plan includes the following:1.A coupon book good for one free sitting every six months for thenext Fve years (10 sittings) at any Heirloom-approved photo studio. Thecustomer receives one free 11-by-14-inch black-and-white print. Additionalphotos or color upgrades can be purchased at the photographer’s retailprices.2.To preserve the 11-by-14-inch photos, the family name is embossedin 24-carat gold on a leather-bound photo album.The embossed leather album, with a retail value of $300, costs Heirloom$75. Each sitting and free 11-by-14-inch print, with a retail value of $150,costs Heirloom only $50 because photographers are given exclusive rights toall Heirloom customers in a geographic region and have the opportunity too±er customers upgrades to color and/or more pictures.The commissioned sales sta± is paid on the 10th of each month, based uponthe prior month’s sales. The commission rates are as follows:NUMBER OF PLANSSOLDCOMMISSIONQUANTITY BONUSFewer than 100$100 per plan101 to 200$125 per planOn sale of plan #101, $2,500 is paid to cover the extra$25 on the first 100 salesMore than 200$150 per planOn sale of plan #201, $5,000 is paid to cover the extra$25 on the first 200 salesOver 70% of all agents sell at least 101 plans per year; 40% sell over 200.There is a strong sales surge before year-end as customers purchase plans togive as holiday gifts. About 67% of all agents reach their highest incentivelevel in late November or December. Heirloom treats the sales sta± and the
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What are compensating controls and how do they relate to segregation of duties and internal control?

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1. What are compensating controls and how do they relate to segregation of duties and internal control? Give some

examples.

2. If a company has a audit performed on their financial statements, Does this guarantee that there is no fraud contained in the financial statements?

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Is the auditor’s liability affected if the third party was unknown rather than known? Why or why not?

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1. Is the auditor’s liability affected if the third party was unknown rather than known? Why or why

not?

2. Discuss the components of the iconic Fraud Triangle.  What are some risk factors for each of the three components?

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