20 May Whaley Distributors Is A Wholesale Distributor Of Electronic Components
| Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the years ended December 31, 2011 and 2012, reported the following amounts and subtotals ($ in millions): |
| Assets | Liabilities | Shareholders’ Equity |
Net Income | Expenses | |||||||||||
| 2011 | $ | 760 | $ | 340 | $ | 420 | $ | 220 | $ | 152 | |||||
| 2012 | 840 | 410 | 430 | 240 | 177 | ||||||||||
| In 2013 the following situations occurred or came to light: |
| a. | Internal auditors discovered that ending inventories reported on the financial statements the two previous years were misstated due to faulty internal controls. The errors were in the following amounts: |
| 2011 inventory | Overstated by | $ | 12.2 | million |
| 2012 inventory | Understated by | $ | 10.2 | million |
| b. | A liability was accrued in 2011 for a probable payment of $7.4 million in connection with a lawsuit ultimately settled in December 2013 for $4.2 million. | ||||||
| c. | A patent costing $19.2 million at the beginning of 2011, expected to benefit operations for a total of six years, has not been amortized since acquired. | ||||||
| d. | Whaley’s conveyer equipment was depreciated by the sum-of-the-years’-digits (SYD) basis since it was acquired at the beginning of 2011 at a cost of $33.0 million. It has an expected useful life of five years and no expected residual value. At the beginning of 2013, Whaley decided to switch to straight-line depreciation.
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| Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the years ended December 31, 2011 and 2012, reported the following amounts and subtotals ($ in millions): |
| Assets | Liabilities | Shareholders’ Equity |
Net Income | Expenses | |||||||||||
| 2011 | $ | 760 | $ | 340 | $ | 420 | $ | 220 | $ | 152 | |||||
| 2012 | 840 | 410 | 430 | 240 | 177 | ||||||||||
| In 2013 the following situations occurred or came to light: |
| a. | Internal auditors discovered that ending inventories reported on the financial statements the two previous years were misstated due to faulty internal controls. The errors were in the following amounts: |
| 2011 inventory | Overstated by | $ | 12.2 | million |
| 2012 inventory | Understated by | $ | 10.2 | million |
| b. | A liability was accrued in 2011 for a probable payment of $7.4 million in connection with a lawsuit ultimately settled in December 2013 for $4.2 million. | ||||||
| c. | A patent costing $19.2 million at the beginning of 2011, expected to benefit operations for a total of six years, has not been amortized since acquired. | ||||||
| d. | Whaley’s conveyer equipment was depreciated by the sum-of-the-years’-digits (SYD) basis since it was acquired at the beginning of 2011 at a cost of $33.0 million. It has an expected useful life of five years and no expected residual value. At the beginning of 2013, Whaley decided to switch to straight-line depreciation.
|
| Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the years ended December 31, 2011 and 2012, reported the following amounts and subtotals ($ in millions): |
| Assets | Liabilities | Shareholders’ Equity |
Net Income | Expenses | |||||||||||
| 2011 | $ | 760 | $ | 340 | $ | 420 | $ | 220 | $ | 152 | |||||
| 2012 | 840 | 410 | 430 | 240 | 177 | ||||||||||
| In 2013 the following situations occurred or came to light: |
| a. | Internal auditors discovered that ending inventories reported on the financial statements the two previous years were misstated due to faulty internal controls. The errors were in the following amounts: |
| 2011 inventory | Overstated by | $ | 12.2 | million |
| 2012 inventory | Understated by | $ | 10.2 | million |
| b. | A liability was accrued in 2011 for a probable payment of $7.4 million in connection with a lawsuit ultimately settled in December 2013 for $4.2 million. | ||||||
| c. | A patent costing $19.2 million at the beginning of 2011, expected to benefit operations for a total of six years, has not been amortized since acquired. | ||||||
| d. | Whaley’s conveyer equipment was depreciated by the sum-of-the-years’-digits (SYD) basis since it was acquired at the beginning of 2011 at a cost of $33.0 million. It has an expected useful life of five years and no expected residual value. At the beginning of 2013, Whaley decided to switch to straight-line depreciation.
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