Answer Happy

L21 X fie Simple to verify but involves complex calculations A B с D E F G Н. J K 7 8 Tolerable Misstatement 9 10 11 Account Name Cash and cash equivalents Receivables, net Inventory 2018 $48,978 $12,875 $122,337 2019 Unaudited Trial Balance $79,359 $8,643 $147,693 Tolerable Misstatement as % of Planning Account Materiality* Balance ** 0% 0% 0% 0% 0% 0% Simple to verify Large account with miss $0 12 Prepaid expenses $17,772 $15,647 0% 0% 13 Deferred income tax benefits $7,132 $10,338 SO 0% 0% 14 15 SO Property, Plant, & Equipment Accumulated depreciation and amortization $206,426 $85,986 $223,736 $97,722 0% 0% 0% 0% 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 $261 Large and complex accou Routine accounting test reasonableness. Relatively complex, estima Taxes Relatively little change fro Accounting estimate tes procedures. The amount will be impa Relatively little volume, no Relatively difficult to au Relatively costly to audi Simple to verify but inve No change from prior yea No change from prior yea Little change from prior ye Not difficult to audit, exam Involves some complex ap Not Applicable Little change from prior ye Intangibles, net $423 $1,734 Lines of credit $11,011 $10,510 Accounts payable & Reserve for returns $68,399 $60,286 Accrued liabilities & Accrued profit sharing $28,270 $33,600 Income taxes payable & Deferred income taxes $18,057 $24,567 Common stock, 26,121 shares issued $261 Donated capital $5,460 $5,460 Additional paid-in capital $20,740 $25,719 Deferred compensation ($79) ($36) Accumulated other comprehensive income $3,883 $2,173 Retained earnings $317,907 $361,402 Treasury stock, 6,546 and 6,706 shares at cost, respectively ($143,950) ($134,512) Total Amount of Tolerable Misstatement Allocated To Balance Sheet Accounts Planning Materiality (from work paper 3-7) Instructions Work Paper 3-7 Work Paper 3-8 Balance Sheet Incon 25% 0% 0% SO 0% 0% 0% 0% 0% 0% 0% 0% $65 0% 25% $1,365 0% SO 0% 0% SO 0% 0% $543 0% 25% Not Applicable Not Applicable Not Applicable $0 0% 0% $1,974 Complete Work Paper 3-7 1. LET TIL RR-I---ITA.. 444 Ready 100%

H 11e_Ch3_Mini_case_Materiality (1) [Protected View] - Excel (Product Activation Failed) Formulas Data Review View Tell me what you want to do... File Home Insert Page Layout Sign in Share PROTECTED VIEW Be careful—files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing X F3 X fx Initial Here А A B с D E F G H H 1 J K L M N 0 Р Materiality $1,800 2. Establish Planning Materiality Level Measurement Base Select Measurement Base Using The Yellow Cell on the Left Percentage Applied* Input a Percentage Here Based on the Guidelines Below Planning Materiality Please Complete Cells Above 12 13 14 15 16 10 17 18 19 19 20 20 21 22 23 24 25 26 27 28 28 29 30 31 Bases and Percentage Ranges: Profit Oriented Entibes Pre-tax income 3 -7% Total Revenue 0.5 -3% Total Assets 0.25 -2% Fout Formula cowanie i wcally the maxTI Not-for-Profit Entities Total Revenue 0.5-3% Total Assets 0.25-2% Mutual Fund Entities Net Asset Value 3-5% Please use this template in conjunction with Willis & Adams Materiality Guidelines. The materiality factors provided are guidelines only and should be used only as an aid as you use professional judgment to determine planning materiality 32 33 34 35 36 37 38 3. Justify/Support Your Level of Planning Materiality State the factors that you considered to determine the appropriate measurement base and percentage to determine planning materiality Measurement Base: Enter your response here 39 40 41 Percentage: Enter your response here 42 43 44 45 The McGraw-Hill Companies, Inc., 2019 Instructions Work Paper 3-7 Work Paper 3-8 Balance Sheet Incon ... Ready 圓 1 + 70%

H 11e_Ch3_Mini_case_Materiality (1) [Protected View] - Excel (Product Activation Failed) Formulas Data Review View Tell me what you want to do... File Home Insert Page Layout Sign in Share PROTECTED VIEW Be careful—files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing X E2 Х fx 1-1 A C F G G Н. J к L L M N O 2 B EARTHWEAR CLOTHIERS Consolidated Balance Sheets 16 wusaros: E 1-1 F90 12/31/2019 December 31 # + $48,978 $12,875 $122.337 $11,458 $6,315 $7,132 $209,095 $49.668 $11,539 $105,425 $10,772 $3,780 $6,930 $188, 115 $70,918 $67,513 $64,986 $3,010 $206,42€ $85,986 $120,440 $423 $329.959 $66,804 $66,876 $47,466 $2,894 $184,040 $76,256 $107,784 $628 $296,527 3 45678 mmHgBH BEHB归四a888四四四四四印78888行889%E4%BF%||| (unaudite 7 Assets d) 8 Current Assets: 9 Cash and cash equivalents $79,359 10 Receivables, net $8,643 11 Inventory $147,693 12 Prepaid advertising $10,212 13 Other prepaid expenses $5,435 14 Deferred income tax benefits $10,338 15 Total ourrent assets $261,680 16 Property, plant and equipment, at cost 17 Land and buildings $76,560 18 Fixtures and equipment $68,632 19 Computer hardware and software $75,400 20 Leasehold improvements $3,144 21 Total property, plant and equipment $223,737 22 Less - accumulated depreciation and amortization $97,722 23 Property, plant and equipment, net $126,014 24 Intangibles, net $1,734 25 Total assets $389,428 26 27 Liabilities and shareholder's investment 28 Current liabilities: 29 Lines of credit $10.510 30 Accounts payable $54,186 31 Reserve for returns $6,100 32 Accrued liabilities $30,492 33 Accrued profit sharing $3,108 34 Income taxes payable $16,222 35 Total current liabilities $120,617 36 Deferred income taxes $8,345 37 Shareholders' investment: 38 Common stock, 26.144 shares issued $261 39 Donated capital $5,460 40 Additional paid-in capital $25,719 41 Deferred compensation ($36) 42 Accumulated other comprehensive income $2,173 43 Retained earnings $361,402 44 Treasury stock, 6,654,7,114, and 6,546 shares at cost, ($134,512) 45 Total shareholders investment $260,467 46 Total liabilities and shareholders investment $389,428 47 48 49 The McGraw-Hill Companies, Inc., 2019 Instructions Work Paper 3-7 $11,011 $62.509 $5,890 $26,738 $1,532 $8,588 $116,268 $9,469 $7,621 $48,432 $5,115 $28,440 $1,794 $6,666 $98,067 $5,926 $261 $5,460 $20,740 ($79) $3,883 $317,907 ($143,950) $204,222 $329,959 $261 $5,460 $19,311 ($153) $1,739 $295,380 ($129,462) $192,535 $296,527 Work Paper 3-8 Balance Sheet Incon ... Ready 圓 + 60%

H 11e_Ch3_Mini_case_Materiality (1) [Protected View] - Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Tell me what you want to do... Sign in Share PROTECTED VIEW Be careful—files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing X E2 X fr 1-2 A с D F G H B (In thousands, except per share data) E 12/31/2019 4. 5 6 2017 7 For the period ended December 31 2019 2018 (unaudited) $1,019,890 $950,484 $572,153 $546,393 $447,737 $404,091 $374,180 $364,012 $857,885 $472,739 $385,146 $334,994 ($1,153) $51,305 $73,557 $40,729 ($878) $989 ($983) $1,459 ($1,229) $573 8 Net Sales 9 Cost of sales 10 Gross Profit 11 Selling, general and administrative expenses 12 Non-recurring charge (credit) 13 Income from operations 14 Other income (expense) 15 Interest expense 16 Interest income 17 Gain on sale of subsidiary 18 Other 19 Total other income (expense), net 20 Income before income taxes 21 Income tax provision 22 Net income 23 Basic earnings per share 24 Diluted earnings per share 25 Basic weighted average shares outstanding 26 Diluted weighted average shares outstanding 27 28 29 The McGraw-Hill Companies, Inc., 2019 30 31 Instructions Work Paper 3-7 ($3,514) ($3,403) $70,154 $26,658 $43,495 1.48 1.45 19,159 19,485 ($4,798) ($4,322) $35,757 $13,230 $22.527 1.15 1.14 19,531 19,774 ($1,091) ($1,747) $49,559 $18,337 $31,222 1.60 1.56 19.555 20,055 Work Paper 3-8 Balance Sheet Incon Ready 圓 + 100%