Ace Your Inventory Management Assignments: Key Techniques
1. Exercises 1. Frontier Park was started on April 1 by CJ. Mendez. The following selected events an...
Exercises 1. Frontier Park was started on April 1 by CJ. Mendez. The following selected events and transactions occurred during April $40,000 cash in the business. 4 Purchased land costing $30,000 for cash 8 Incurred advertising expense of $1,800 on account l salaries employees $1,500 13 Paid $1,500 cash for a one-year insurance policy. 17 Withdrew $1,000 cash for personal use. 20 Received $5,700 in cash for admission fees. 25 sold 100 coupon books for $25 per book. Each book contains 10 coupons that entitle the holder to one admission to the park. 30 Received $8,900 in cash for admission fees. 30 Paid $900 on accounts payable. REQUIRED: omit explanations for the Prepare journal entries to the April transactions-you may record transactions. (Work paper attached).
2. 12. The inventory system employing accounting records that continuously disclose the amount of in...
12. The inventory system employing accounting records that continuously disclose the amount of inventory is called
A. periodic
B. perpetual
C. physical
D. retail
13. Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. The Pound Co. paid the invoice within the discount period. What is the sales amount to be recorded in the above transactions?
a.$25,500
b.$26,010
c.$24,990
d.$16,000
14. Calculate income from operations for Jonas Company based on the following data:
Sales | $764,000 |
Operating expenses | 52,500 |
Cost of merchandise sold | 538,000 |
a.$173,500
b.$226,000
c.$711,500
d.$485,500
15. Calculate the gross profit for Jefferson Company based on the following:
Sales | $764,000 |
Selling Expenses | 42,500 |
Cost of Merchandise Sold | 538,000 |
a.$226,000
b.$721,500
c.$495,500
d.$183,500
16. Which of the following is not a difference between a retail business and a service business?
A. the inclusion of gross profit on the income statement
B. merchandise inventory included on the balance sheet
C. accounting equation
D. in what is sold
17. Who is responsible for the freight costs when the terms are FOB shipping point?
A. the buyer
B. the seller
C. the ultimate customer
D. either the seller or the buyer
18. Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a
A. credit to Sales
B. credit to Accounts Payable
C. debit to Cost of Merchandise Sold
D. credit to Merchandise Inventory
19. The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be
A. Jan. 1 Office Supplies 1,500
Cash 1,500
B Jan. 1 Merchandise Inventory 1,500
Cash 1,500
C. Jan. 1 Purchases 1,500
Accounts Payable 1,500
D. Jan. 1 Cash 1,500
Accounts Receivable 1,500
20. During the current year, merchandise is sold for $137,500 cash and $425,600 on account. The cost of the merchandise sold is $322,325.
What is the amount of the gross profit? $_______
21. The control environment in an internal control structure is the overall attitude of management and employees about the importance of internal control.
True or False
22. Businesses who have several bank accounts, petty cash, and cash on hand, would maintain a separate ledger account for each type of cash.
True or False
23. In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement.
True or False
3. Rosalinda Perez Forwarders borrowed P600,000 from the bank on Sept. 1, 2020. The note carried an 8%.
Rosalinda Perez Forwarders borrowed P600,000 from the bank on Sept. 1, 2020. The note carried an 8% annual rate of interest and was set to mature on Feb. 28, 2021. Interest and principal were paid in cash on the maturity date.
4. 1. X Ltd., a large manufacturer of cosmetics, sells merchandise to Y Ltd., a retailer, which in turn
1. X Ltd., a large manufacturer of cosmetics, sells merchandise to Y Ltd., a retailer, which in turn sells the goods to the public at large through its chain of retail outlets. Y Ltd. purchases merchandise from X Ltd. under a consignment contract. When should revenue from the sale of merchandise to Y Ltd. be recognized by X Ltd.? (a) When goods are delivered to Y Ltd. (b) When goods are sold by Y Ltd. (c) It will depend on the terms of delivery of the merchandise by X Ltd. to Y Ltd. (i.e., CIF [cost, insurance, and freight] or FOB). (d) It will depend on the terms of payment between Y Ltd. and X Ltd. (i.e., cash or credit). 2. M Ltd, a new company manufacturing and selling consumable products, has come out with an offer to refund the cost of purchase within one month of sale if the customer is not satisfied with the product. When should M Ltd. recognize the revenue? (a) When goods are sold to the customers. (b) After one month of sale. (c) Only if goods are not returned by the customers after the period of one month. (d) At the time of sale along with an offset to revenue of the liability of the same amount for the possibility of the return.
5. Question Beckman Enterprises purchased a depreciable asset on October 1,Year 1 at a cost of...
Question
Beckman Enterprises purchased a depreciable asset on October 1,Year 1 at a cost of $168,000. The asset is expected to have asalvage value of $16,700 at the end of its five-year useful life.If the asset is depreciated on the double-declining-balance method,the asset's book value on December 31, Year 2 will be:
6. SunnyRest Hotel has 300 rooms. During the month of March, it had 7,200 guests, each staying a single
SunnyRest Hotel has 300 rooms. During the month of March, it had 7,200 guests, each staying a single night. The occupancy rate for SunnyRest Hotel for the month of March was closest to
a.70%
b.120%
c.80%
d.90%
7. For this exercise, your client, Bright IDEAs Inc., has provided you with a listing of sales invoi...
For this exercise, your client, Bright IDEAs Inc., has provided you with a listing of sales invoices. To test whether the client appears to have a receivables collectability problem, the auditor must complete a series of related steps:
1. Import the client’s database of sales invoices (pp. 28–45 of the IDEA Workbook).
2. Perform an aging analysis by following the instructions on pp. 52–56 of the IDEA Workbook.
Required Data Files:
IDEA Data Analysis Workbook
ACC_REC2015.ACCDB
Required:
Complete all of the related steps shown above using IDEA. After completing each step, answer the following questions. (Enter your answers exactly as they appear in IDEA.)
a. Upon importing the ACC_REC2015.ACCDB data file, what is the total Number of Records shown by IDEA? what is the Control Total for the GROSS_AMT Field shown by IDEA?
b. What percentage of customers have accounts that are aged greater than 90 days?
c. What percentage of customer balances (net value) are aged greater than 90 days?
d-1. Determine the effect that your findings in parts (b) and (c) would have on the auditor's assessment of the risk of material misstatement.
d-2. Determine which of the given accounts and assertions are most likely influenced by your findings.
Complete this question by entering your answers in the tabs below Reqyired A Res B and c Required D1 Required D2 b. What percentage of customers have accounts that are aged greater than 90 days? c. What percentage of customer balances (net value) are aged greater than 90 days? (Enter both answers as whole percentages rounded to 2 decimal places.) b. Percentage of customers have accounts that are aged greater than 90 days c. Percentage of customer balances (net value) are aged greater than 90 days KRequired A Required D1 >
At Vision Club Company, office workers are employed for a 40-hour workweek on either an annual or a monthly salary basis. Given on the form below are the current annual and monthly salary rates for five office workers for the week ended December 13, 2013 (50th payday of the year). In addition, with this pay, these employees are paid their sliding-scale annual bonuses. The bonuses are listed on the register. For each worker, compute:
1. Regular earnings for the weekly payroll ended December 13, 2013.
2. Overtime earnings (if applicable).
3. Total regular, overtime earnings, and bonus.
4. FICA taxable wages for this pay period. 5. FICA taxes to be withheld for this pay period.
9. Matching Funds and Identifying Characteristics with Fund and Gov
Matching Funds and Identifying Characteristics with Fund and Government-wide Financial Reporting Categories. For each fund or government-wide category listed in the left-hand column, choose the letter(s) of the applicable fund type or characteristic in the right-hand column. Multiple letters may apply to each category.
Fund or Government—wide Category Fund Type or Characteristic
1. Governmental funds a. Operational accountability
2. Proprietary funds b. Modified accrual
3. Fiduciary fundsc. Agency funds
4. Governmental activities, d. Statement of cash flows
government-wide e. Fiscal accountability
5. Business-type activities,f Debt service funds
government-wide g. Current and noncurrent assets and liabilities
h. Internal service funds
I. Integrated budgetary accounts
j. Revenues and expenses
k. Additions and deductions
10. (Objectives 8-2, 8-3, 8-4) Winston Black was an audit partner in the firm of Henson, Davis &...
(Objectives 8-2, 8-3, 8-4) Winston Black was an audit partner in the firm of Henson, Davis & Company. He was in the process of reviewing the audit files for the audit of a new client, McMullan Resources. McMullan was in the business of heavy construction. Black was conducting his first review after the audit was substantially complete. Normally, he would have done an initial review during the planning phase as required by his firm’s policies; however, he had been overwhelmed by an emergency with his largest and most important client. He rationalized not reviewing audit planning information because (1) the audit was being overseen by Sarah Beale, a manager in whom he had confidence, and (2) he could “recover” from any problems during his end-of-audit review. Now, Black found that he was confronted with a couple of problems. First, he found that the firm may have accepted McMullan without complying with its new-client acceptance procedures. McMullan came to Henson, Davis & Company on a recommendation from a friend of Black’s. Black got “credit” for the new business, which was important to him because it would affect his compensation from the firm. Because Black was busy, he told Beale to conduct a new-client acceptance review and let him know if there were any problems. He never heard from Beale and assumed everything was okay. In reviewing Beale’s preaudit planning documentation, he saw a check mark in the box “Contact prior auditors” but found no details indicating what was done. When he asked Beale about this, she responded with the following:
“I called Gardner Smith [the responsible partner with McMullan’s prior audit firm] and left a voicemail message for him. He never returned my call. I talked to Ted McMullan about the change, and he told me that he informed Gardner about the change and that Gardner said, “Fine, I’ll help in any way I can.” Ted said Gardner sent over copies of analyses of fixed assets and equity accounts, which Ted gave to me. I asked Ted why they replaced Gardner’s firm, and he told me it was over the tax contingency issue and the size of their fee. Other than that, Ted said the relationship was fine.”
The tax contingency issue that Beale referred to was a situation in which McMullan had entered into litigation with a bank from which it had received a loan. The result of the litigation was that the bank forgave several hundred thousand dollars in debt. This was a windfall to McMullan, and they recorded it as a gain, taking the position that it was non - taxable. The prior auditors disputed this position and insisted that a contingent tax liability existed that required disclosure. This upset McMullan, but the company agreed in order to receive an unqualified opinion. Before hiring Henson, Davis & Company as their new auditors, McMullan requested that the firm review the situation. Henson, Davis & Company believed the contingency was remote and agreed to the elimination of the disclosure. The second problem involved a long-term contract with a customer in Montreal. Under accounting standards, McMullan was required to recognize income on this contract using the percentage-of-completion method. The contract was partially completed as of year-end and had a material effect on the financial statements. When Black went to review the copy of the contract in the audit files, he found three things. First, there was a contract summary that set out its major features. Second, there was a copy of the contract written in French. Third, there was a signed confirmation confirming the terms and status of the contract. The space request - ing information about any contract disputes was left blank, indicating no such problems. Black’s concern about the contract was that to recognize income in accordance with accounting standards, the contract had to be enforceable. Often, contracts contain a can - cellation clause that might mitigate enforceability. Because he was not able to read French,
Black couldn’t tell whether the contract contained such a clause. When he asked Beale about this, she responded that she had asked the company’s vice president for the Canadian division about the contract and he told her that it was their standard contract. The company’s standard contract did have a cancellation clause in it, but it required mutual agreement and could not be cancelled unilaterally by the buyer.
a. Evaluate and discuss whether Henson, Davis & Company complied with auditing standards in their acceptance of McMullan Resources as a new client. What can they do at this point in the engagement to resolve deficiencies if they exist?
b. Evaluate and discuss whether sufficient audit work has been done with regard to McMullan’s Montreal contract. If not, what more should be done?
c. Evaluate and discuss whether Black and Beale conducted themselves in accordance with auditing standards.
(Objective 8-2)
ACCEPT CLIENT AND PERFORM INITIAL AUDIT PLANNING
Initial audit planning involves four things, all of which should be done early in the audit:
1. The auditor decides whether to accept a new client or continue serving an existing one. This determination is typically made by an experienced auditor who is in a position to make important decisions. The auditor wants to make this decision early, before incurring any significant costs that cannot be recovered.
2. The auditor identifies why the client wants or needs an audit. This information is likely to affect the remaining parts of the planning process.
3. To avoid misunderstandings, the auditor obtains an understanding with the client about the terms of the engagement.
4. The auditor develops an overall strategy for the audit, including engagement staffing and any required audit specialists.
Even though obtaining and retaining clients is not easy in a competitive profession such as public accounting, a CPA firm must use care in deciding which clients are accept - able. The firm’s legal and professional responsibilities are such that clients who lack integrity or argue constantly about the proper conduct of the audit and fees can cause more problems than they are worth. Some CPA firms now refuse any clients in certain high-risk industries, such as software technology companies, health, and casualty insurance companies, and may even discontinue auditing existing companies in those industries. Some smaller CPA firms will not do audits of publicly held clients because of the risk of litigation or because of costs associated with registering the audit firm with the PCAOB. Stated in terms of acceptable audit risk, an auditor is unlikely to accept a new client or continue serving an existing client if acceptable audit risk is below the risk threshold the firm is willing to accept.