15 Feb Kapp Furniture, Inc., a manufacturer of fine hardwood furniture, is a publicly held SEC-registered company with a December 31 year-end. During May, Kapp had a flood due to heavy ra
Kapp Furniture, Inc., a manufacturer of fine hardwood furniture, is a publicly held SEC-registered company with a December 31 year-end. During May, Kapp had a flood due to heavy rains at its major manufacturing facility that damaged about $525,000 of furniture. Kapp is insured for the property loss at replacement value and carries business interruption insurance for lost production. The company anticipates that the total insurance proceeds will exceed the carrying value of the destroyed furniture, and the cost of repairing the facility will be in the range of $700,000 to $1.75 million. The company believes that the insurance carrier will advance approximately 50% of the expected proceeds sometime during July. The company has resumed its operations to about one half of normal capacity and expects to operate at full capacity by September. The company does not expect to file a formal insurance claim until this, because it expects that the entire cost of the business interruption will not be known until September. Kapp expects to receive the proceeds of the settlement from the insurance carrier during its fourth quarter.
The company is in the process of making a stock offering and will file a registration statement with the SEC at the end of July, in which it will present stub period financial statements covering the six-month period through June 30. Based on the minimum amount of the expected proceeds, Kapp would like to recognize a receivable for the insurance proceeds and to report a gain in its financial statements for the period ended June 30. The company also would like to allocate a portion of the expected proceeds to cost of products sold.
Assuming that Kapp records a receivable from the insurance company on June 30 for the proceeds, what type of audit evidence would you, as the auditor, gather to support the amount recorded?
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.