Effective Strategies for Accounting Module Mastery

Effective Strategies for Accounting Module Mastery
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Effective Strategies for Accounting Module Mastery

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1. Your organization, located in Manitoba, will be enhancing the group benefits plan offered to...



Your organization, located in Manitoba, will be enhancing the group benefits plan offered to employees in two months by adding accidental death and dismemberment (AD&D) coverage and vision care coverage. The organization will pay 50% of the cost of the AD&D premiums and 50% of the cost of the vision care premiums, with the employees paying the other 50% of each premium. The Manager of Finance, Brenda Franklin, has requested that you, as the Payroll Supervisor, prepare a communication for the employees, explaining how these new benefits will impact their net pay.

Prepare your response using your name, correct spelling, grammar and punctuation. You will be penalized if you areexcessively over or under the suggested word count. Your response must be stated in your own words and should be based on the course material, your experiences, knowledge gained through the course and at least one external government resource.

Please the Memo format.



2. Graham Potato Company has projected sales of $6,000 in September, $10,000 in October, $16,000 in...



Graham Potato Company has projected sales of $6,000 in September, $10,000 in October, $16,000 in November, and $12,000 in December. Of the company's sales, 20 percent are paid for by cash and 80 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale. Determine collections for November and December. Also assume that the company's cash payments for November and December are $13,000 and $6,000, respectively. The beginning cash balance in November is $5,000, which is the desired minimum balance. Prepare a cash budget with borrowing needed or repayments for November and December.



3. Shown below are next year's budgeted production data and manufacturing costs for the company.



Bookdon Public Limited Company manufactures three products in two production departments, a machine shop and a fitting section; it also has two service departments, a canteen and a machine maintenance section. Shown below are next year's budgeted production data and manufacturing costs for the company.




























































 

Product



Product



Product


 

X



Y



Z



Production



4200 units



6900 units



1700 units



Prime cost:


     

Direct materials



£11 per unit



£14 per unit



£17 per unit



Direct labour:


     

Machine shop



£6 per unit



£4 per unit



£2 per unit



Fitting section



£12 per unit



£3 per unit



£21 per unit



Machine hours per unit



6 hours per unit



3 hours per unit



4 hours per unit




 






























































































       

Machine


 
 

Machine



Fitting


 

Maintenance


 
 

shop



section



Canteen



Section



Total



Budgeted overheads (£):


         

Allocated overheads



27660



19470



16600



26650



90380



Rent, rates, heat and light


       

17000



Depreciation and insurance of equipment


       

25000



Additional data:


         

Gross book value of equipment (£)



150000



75000



30000



45000


 

Number of employees



18



14



4



4


 

Floor space occupied (square metres)



3600



1400



1000



800


 


It has been estimated that approximately 70% of the machine maintenance section's costs are incurred servicing the machine shop and the remainder incurred servicing the fitting section.



Required:



(a) (i) Calculate the following budgeted overhead absorption rates:



A machine hour rate for the machine shop.



A rate expressed as a percentage of direct wages for the fitting section.



All workings and assumptions should be clearly shown.



(ii) Calculate the budgeted manufacturing overhead cost per unit of product X.



(b) The production director of Bookdon PLC has suggested that 'as the actual over-heads incurred and units produced are usually different from the budgeted and as a consequence profits of each month end are distorted by over/under absorbed overheads, it would be more accurate to calculate the actual overhead cost per unit each month end by dividing the total number of all units actually produced during the month into the actual overheads incurred.'



Critically examine the production director's suggestion.



4. Beyoncé Corporation factors $175,000 of accounts receivable with Kathleen Battle Financing, Inc....



Beyoncé Corporation factors $175,000 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2014. Kathleen Battle Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments.

(b)

Assume that the conditions are met for the transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2014, for Beyoncé to record the sale of receivables, assuming the recourse liability has a fair value of $2,000.(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)











































Date



Account Titles and Explanation



Debit



Credit



August 15, 2014



 



 



 


 

 



 



 


 

 



 



 


 

 



 



 


 

 



 



 




5. Product mix, constrained resource. Wechsler Company produces three products: A130, B324, and...



Product mix, constrained resource. Wechsler Company produces three products: A130, B324, and C587. All three products use the same direct material, Brac. Unit data for the three products are:



https://files.transtutors.com/book/qimg/1a88526a-ab4f-4834-8ae4-9935e1d37fce.png



The demand for the products far exceeds the direct materials available to produce the products. Brac costs $9 per pound, and a maximum of 5,000 pounds is available each month. Wechsler must produce a minimum of 200 units of each product.



1. How many units of product A130, B324, and C587 should Wechsler produce?



2. What is the maximum amount Wechsler would be willing to pay for another 1,200 pounds of Brac?



6. A manufacturer of computer chips claims that less than 10% of its products are defective. When 1,000



A manufacturer of computer chips claims that less than 10% of its products are defective. When 1,000 chips were drawn from a large production, 7.5% were found to be defective. a. What is the population of interest? b. What is the sample? c. What is the parameter? d. What is the statistic? e. Does the value 10% refer to the parameter or to the statistic? f. Is the value 7.5% a parameter or a statistic? g. Explain briefly how the statistic can be used to make inferences about the parameter to test the claim



7. Double Entry Records for Depreciation A company maintains its non-current assets at cost...



Double Entry Records for Depreciation A company maintains its non-current assets at cost. Depreciation provision accounts, one for each type of asset, are in use. Machinery is to be depreciated at the rate of 15% per annum, and fixtures at the rate of 5% per annum, using the reducing balance method. Depreciation is to be calculated on assets in existence at the end of each year, giving a full year’s depreciation even though asset was bought part of the way through the year. There should be no depreciation in the year of sale. The following transactions in assets have taken place: 2005 1 January Bought machinery 1 $2,800, fixtures 1 $290 1 July Bought fixtures2 $620 2006 1 October Bought machine 3 $3,500 2008 1 November Sold Machine 1 for $2000 cash 1 December Sold Fixtures 1 for $200 cash The financial year end of the business is 31 December You are to show: 1. The machinery Account 2. The Fixtures Account 3. The two separate provision for depreciation accounts 4. The two separate disposal accounts 5. The two separate profit and loss extracts 6. The non-current assets section of the balance sheet as the end of each year for the 4 years



8. Taylor Company produces two products. X and Y, which account for 70% and 30%, respectively, of to...



Show transcribed image text Taylor Company produces two products. X and Y, which account for 70% and 30%, respectively, of total sales dollars. Contribution margin ratios are 60% for X and 30% for Y. Total costs are $140,000. What is Taylor's break-even point sales dollars? $328, 767 $274, 510 $375,000 $342, 856



9. 13) For a manufacturing company, direct material costs may be included in ________. A) direct materi



13) For a manufacturing company, direct

material costs may be included in ________.

A) direct materials inventory only

B) merchandise inventory only

C) both work-in-process inventory and

finished goods inventory

D) direct materials inventory,

work-in-process inventory, and finished goods inventory accounts



14) For a manufacturing company, direct

labor costs may be included in ________.

A) direct materials inventory only

B) merchandise inventory only

C) both work-in-process inventory and

finished goods inventory

D) direct materials inventory,

work-in-process inventory, and finished goods inventory accounts



15) For a manufacturing company, indirect

manufacturing costs may be included in ________.

A) direct materials inventory only

B) merchandise inventory only

C) both work-in-process inventory and

finished goods inventory

D) direct materials inventory,

work-in-process inventory, and finished goods inventory accounts



16) For a manufacturing-sector company,

the cost of factory depreciation is classified as a ________.

A) direct material cost

B) direct manufacturing labor cost

C) manufacturing overhead cost

D) period cost



17) Which of the following cost is

included in cost of goods sold?

A) customer service cost

B) manufacturing labor cost

C) distribution cost

D) marketing cost



18) Manufacturing overhead costs in an

automobile manufacturing plant most likely include ________.

A) labor costs of the painting department

B) indirect material costs such as

lubricants

C) leather seat costs

D) tyre costs



19) Manufacturing overhead costs are also

referred to as ________.

A) indirect manufacturing costs

B) prime costs

C) direct manufacturing costs

D) direct material



20) Target reports ________.

A) only merchandise inventory

B) only finished goods inventory

C) direct materials inventory,

work-in-process inventory, and finished goods inventory accounts

D) no inventory accounts



10. A product passes through two distinct processes A and B and then to finished stock.



A product passes through two distinct processes A and B and then to finished stock. The output of A passes direct to “B” and that of “B” passes to the finished stock. From the following information, you are required to prepare the process accounts:
























































 

Process A



Process B



Materials consumed (Rs.)



12,000



6,000



Direct labour (Rs.)



14,000



8,000



Manufacturing expenses (Rs.)



4,000



4,000



Input in Process A (units)



10,000





Input in Process A (value)



10,000





Output (units)



9,400



8,300



Normal wastage (% of output)



5%



10%



Value of normal wastage



8



10



per 100 units (Rs.)


   


No opening or closing stock is held in process.



11. You are considering investing in Acme Incorporated. The company has provided you with the balance sh



  You are considering investing in Acme Incorporated. The company has provided you with the balance sheet and income statement for the previous year. The current price of one share of stock is $46.25. Earning per share last year was $1.86.



Explain how the balance sheet and income statement statements differ?



2. Calculate the requested financial ratios:



Current ratio



Quick/Acid Test ratio



         b.     Debt-to-equity ratio



         c.     Return on sales (use net income AFTER taxes)



         d.     Return on equity (use net income AFTER taxes)



         e.     Earnings per share (use net income AFTER taxes)



2. Would you invest in Acme Incorporated? Why or why not? Discuss in detail each ratio calculation and what you derive from analyzing the individual Ratios and then again all of them together. What kind of picture do you get about ACME from this information?



Acme Incorporated



Statement of Income



FY 201X



     REVENUES



            Net Sales                                               $4,090,970



            Other Income                                           +104,227



                     Total Revenue                                                         $4,195,197



     COST OF GOODS SOLD                                                                        $2,673,129



     GROSS PROFIT (GROSS MARGIN)                                  $1,522,068



     OPERATING EXPENSES



            Total Selling Expenses                                                        $333,300



            Total General Expenses                                                    + 306,036



     Total Operating Expenses                                                      $ $639,336



     NET INCOME BEFORE TAXES                                             $882,732



     Income Tax Paid (25%)                                                         $ $220,683



     NET INCOME AFTER TAXES                                                $662,049



Acme Incorporated



Balance Sheet



December 31, 201X



            ASSETS



                Current Assets



                     Cash                                                $280,928



                                 Marketable Securities                          514,800



                     Accounts Receivable                          108,694



                     Notes Receivable                                855,771



                     Inventories                                          218,156



                                 Prepaid Expenses and Other                88,237



                                     Current Assets



                     Total Current Assets                                                  $2,066,586



                Fixed Assets



                     Land                                                 $510,000



                     Plant and Buildings                             304,096



                     Equipment                                          218,500



                     Total Fixed Assets                                                    $1,744,701



                Other Assets



                     Goodwill, Net                                      $49,930



                     Total Other Assets                                                   $   $49,930



                TOTAL ASSETS                                                            $3,861,217



            LIABILITIES AND STOCKHOLDERSA????1 EQUITY



                Current Liabilities



                     Accounts Payable                             $226,977



                                 Accrued Expenses and Other              380,496



                                     Current Liabilities



                     Current Portion of Finance Debt          382,579



                     Total Current Liabilities                                                 $990,052



     



                Long?Term Liabilities



                     Notes Payable                                  $228,772



                     Bonds                                                380,000



                                 Other Long-Term Liabilities                                        $    $29,478



                     Total Long?Term Liabilities             $   638,250



                Total Liabilities                                                               $1,628,303



                OwnerA????1s Equity



                     Common Stock                               $ 389,538



                                     (342,196 Shares Outstanding)



                     Retained Earnings                            1,843,377



                     Total OwnersA????1 Equity                                                  $2,232,915



                TOTAL LIABILITIES AND



                     STOCKHOLDERSA????1 EQUITY                                       $3,861,217



12. (Objectives 12-2, 12-3, 12-4, 12-5) The Meyers Pharmaceutical Company has the following system...



(Objectives 12-2, 12-3, 12-4, 12-5) The Meyers Pharmaceutical Company has the following system for billing and recording accounts receivable:



1. An incoming customer’s purchase order is received in the order department by a clerk who prepares a prenumbered company sales order on which the pertinent information, such as the customer’s name and address, customer’s account number, and items and quantities ordered, is inserted.After the sales order has been prepared, the customer’s purchase order is stapled to it.



2. The sales order is then passed to the credit department for credit approval. Rough approximations of the billing values of the orders are made in the credit department for those accounts on which credit limitations are imposed. After investigation, approval of credit is noted on the sales order.



3. Next the sales order is passed to the billing department, where a clerk key-enters the sales order information onto a data file, including unit sales prices obtained from an approved price list. The data file is used to prepare sales invoices. The billing application automatically accumulates daily totals of customer account numbers and invoice amounts to provide “hash” totals and control amounts. These totals, which are inserted in a daily record book, serve as predetermined batch totals for verification of computer inputs. The billing is done on prenumbered, continuous, multi-copy forms that have the following designations:



(a) Customer copy



(b) Sales department copy, for information purposes



(c) File copy



(d) Shipping department copy, which serves as a shipping order



Bills of lading are also prepared as by-products of the invoicing procedure.



4. The shipping department copy of the invoice and the bills of lading are then sent to the shipping department. After the order has been shipped, copies of the bill of lading are returned to the billing department. The shipping department copy of the invoice is filed in the shipping department.



5. In the billing department, one copy of the bill of lading is attached to the customer’s copy of the invoice and both are mailed to the customer. The other copy of the bill of lading, together with the sales order is then stapled to the invoice file copy and filed in invoice numerical order.



6. The data file is updated for shipments that are different from those billed earlier. After these changes are made, the file is used to prepare a sales journal in sales invoice order and to update the accounts receivable master file. Daily totals are printed to match the control totals prepared earlier. These totals are compared with the “hash” and control totals by an independent person



a. Identify the important controls and related sales transaction-related audit objectives.



b. List the procedures that a CPA will use in an audit of sales transactions to test the identified controls and the substantive aspects of the sales transactions.



(Objective 12-2)



ASSESSING RISKS OF INFORMATION TECHNOLOGY



Although IT can improve a company’s internal control, it can also affect the company’s overall control risk. Many risks in manual systems are reduced and in some cases eliminated. However, there are risks specific to IT systems that can lead to substantial losses if ignored. If IT systems fail, organizations can be paralyzed by the inability to retrieve information or by the use of unreliable information caused by processing errors. These risks increase the likelihood of material misstatements in financial statements. Specific risks to IT systems include:



1. Risks to hardware and data



2. Reduced audit trail 3. Need for IT experience and separation of IT duties Although IT provides significant processing benefits, it also creates unique risks in protecting hardware and data, as well as introducing potential for new types of errors. Specific risks include the following:



• Reliance on the functioning capabilities of hardware and software. Without proper physical protection, hardware or software may not function or may function improperly. Therefore, it is critical to physically protect hardware, software, and related data from physical damage that might result from inappropriate use, sabotage, or environmental damage (such as fire, heat, humidity, or water).



• Systematic versus random errors. When organizations replace manual procedures with technology-based procedures, the risk of random error from human involve ment decreases. However, the risk of systematic error increases because once procedures are programmed into computer software, the computer processes information consistently for all transactions until the programmed procedures are changed. Unfortunately, flaws in software programming and changes to that software affect the reliability of computer processing, often resulting in many significant misstatements. This risk is increased if the system is not programmed to recognize and flag unusual transactions or when trans action audit trails are inadequate.



• Unauthorized access. IT-based accounting systems often allow online access to electronic data in master files, software, and other records. Because online access can occur from remote access points, including by external parties with remote access through the Internet, there is potential for illegitimate access. Without proper online restrictions such as passwords and user IDs, unauthorized activity may be initiated through the computer, resulting in improper changes in software programs and master files.



• Loss of data. Much of the data in an IT system are stored in centralized electronic files. This increases the risk of loss or destruction of entire data files. This has severe ramifications, with the potential for misstated financial statements and, in certain cases, serious interruptions of the entity’s operations. Misstatements may not be detected with the increased use of IT due to the loss of a visible audit trail, as well as reduced human involvement. In addition, the computer replaces traditional types of authorizations in many IT systems.



• Visibility of audit trail. Because much of the information is entered directly into the computer, the use of IT often reduces or even eliminates source documents and records that allow the organization to trace accounting information. These docu ments and records are called the audit trail. Because of the loss of the audit trail, other controls must be put into place to replace the traditional ability to compare output information with hard-copy data.



• Reduced human involvement. In many IT systems, employees who deal with the initial processing of transactions never see the final results. Therefore, they are less able to identify processing misstatements. Even if they see the final output, it is often diffi - cult to recognize misstatements because underlying calculations are not visible and the results are often highly summarized. Also, employees tend to regard output generated through the use of technology as “correct” because a computer produced it.



• Lack of traditional authorization. Advanced IT systems can often initiate trans - actions automatically, such as calculating interest on savings accounts and ordering inventory when pre-specified order levels are reached. Therefore, proper authori zation depends on software procedures and accurate master files used to make the authorization decision. IT systems reduce the traditional separation of duties (authorization, record keeping, and custody) and create a need for additional IT experience.



• Reduced separation of duties. Computers do many duties that were traditionally segregated, such as authorization and record keeping. Combining activities from different parts of the organization into one IT function centralizes responsi - bilities that were traditionally divided. IT personnel with access to software and master files may be able to steal assets unless key duties are segregated within the IT function.



• Need for IT experience. Even when companies purchase simple off-the-shelf accounting software packages, it is important to have personnel with knowledge and experience to install, maintain, and use the system. As the use of IT systems increases, the need for qualified IT specialists increases. Many companies create an entire function of IT personnel, while other companies outsource the manage - ment of IT operations. The reliability of an IT system and the informa tion it generates often depends on the ability of the organization to employ personnel or hire consultants with appropriate technology knowledge and experience.



(Objective 12-3)


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