Chapter 1, Problem 1.6AP

Entity A is a listed company in Hong Kong.  It did not keep completed accounting records for the period from 1 April 2019 to 31 March 2020 because the previous accounting manager suddenly resigned on 1 April 2019 and the position was kept vacant up to 31 March 2020. However, Entity A needs to prepare the financial statements for the year ended 31 March 2020 in order to fulfil the financial reporting requirements.  David Chan (David) is the managing director of Entity A.  The new accountant, Tammy Li (Tammy) was employed by David on 1 April 2020.  She worked very hard to find any useful information to facilitate the preparation for financial statements as at 31 March 2020. The information which was found by Tammy are listed as below:   (1)     Entity A Statements of Financial Position                                         as at 31 March 2019                               $  $  Assets     Non-current assets     Office equipment   2,625,000 Current assets…

You have just finished presenting a summary of this year's financial results to the board of directors.  Included in your presentation was an income statement including both basic and diluted EPS figures.  One of the board members comments that they understand basic EPS but has no clue what diluted EPS is.  The board member actually wondered aloud whether this diluted EPS computation was part of some "full-employment for accountants" project.  How would you further explain the concept of dilution and what diluted EPS is trying to measure to the uncertain board member?

33. You have been engaged to examine the financial statements of Tupac Corporation for the year 2023. The bookkeeper who maintains the financial records has prepared all of the unadjusted financial statements for the Corporation since its organization on January 2, 2021. You discover numerous errors that have been made in these statements. The client has asked you to compute the correct income for the three years 2021 through 2023 and to prepare a corrected balance sheet as of December 31, 2023. In the course of your examination, you discover the following:     The Corporation includes sales taxes collected form customers in the Sales account. When sales tax collections for a month are remitted to the taxing authority on the 15thof the following month, the Sales Tax Expense account is charged. All sales are subjected to a 3% sales tax. Total sales plus sales taxes for 2021 through 2023 were P495,430, P762,200 and P875,500, respectively. The totals of the Sales Tax Expense account for…