Financial Accounting > CASE STUDY > ACCT 305Apollo Shoes 7e Solutions_Fixed Assets Teaching Notes. (All)

ACCT 305Apollo Shoes 7e Solutions_Fixed Assets Teaching Notes.

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ACCT 305Apollo Shoes 7e Solutions_Fixed Assets Teaching Notes Fixed Assets should not present the student very many challenges. The audit of fixed assets will require the student to verify new ... purchases during 2017 and insure that they are properly recorded. The student will also need to recalculate depreciation. Fixed Assets Task: Apollo Page • Audit Fixed Assets – this will require the audit plan 116 • Examine Depreciation Expense 116 Points to Remember • Students need to note that the repair and painting to the building should be expensed and not capitalized. You should have a few students that noticed in the accounting manual on page 36 that the company policy is to capitalize all repairs and maintenance over $5,000. However, the nature of this repair due to the storm should cause it to be expensed. This could lead into a discussion concerning natural disasters like Katrina. • The machinery has been assigned a useful life of 5 years, but has been depreciated using a 7 year life. The 5 year life should be used. The accounting policies on page 36 give the company’s useful lives. • The machinery was purchased and installed in January, but hasn’t yet been operated. Some may point out that the machinery has not been placed in service; this raises the question of possible impairment and the propriety of depreciating an asset which has never been operated. • In many audits, only the additions to fixed assets are examined since prior year workpapers include the audit of the assets when placed in service. Since this is a new audit, that option is not available. However, Timothy examined all titles of land, buildings and vehicles to prove ownership (even though the value wasn’t proven, which it would be in a real audit). • Timothy did look at all supporting documents for 2017 additions. [Show More]

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