Date: Thu, 28 FEB 2008, 00:42:35 +0000
From: "Darlene Wardlaw" <DW@aow.cpa>
Subject: Drafting Financial Statements
Well, Arnold spoke with Larry Lancaster about your proposed adjustments in a four-
hour meeting. They (Apollo) admitted they missed some adjustments at the end of
the year and have (grudgingly) agreed to make all of the entries except the ones
related to the Mall-Warts account (i.e., those related to the December sale and any
adjustment to the Allowance for Doubtful Accounts). Larry is arguing that even
though Mall-Warts is in bankruptcy, they will come out of it and be able to pay
Apollo the amounts owed, including the questionable December sale. Arnold and I
1. Prepare the balance sheet as of December 31, 2007, and the income
statement for the year ended December 31, 2007 assuming Apollo doesn’t
adjust sales and accounts receivable for the questionable December sale.
(Remember that even though we are drafting the statements; Apollo’s
management is responsible for them.)
2. Prepare a cash flow statement for the year ended December 31, 2007.
3. Identify information you believe should be included in notes to the
financial statements. Draft the notes. You can use last year’s as a guide.
4. Also, you may want to draft any management letter comments on anything
you believe Apollo Shoes can do better from an operational economy
and/or efficiency perspective, or methods of strengthening their internal
controls. Even though we do not intend to be Apollo’s auditor next year, we
want to maintain our professionalism.
All of these workpapers should be in the A-series workpapers.