The board of trustees of a local church is concerned about the internal accounting controls for the offering collections made at weekly services. The trustees ask you to serve on a three-person audit team with the internal auditor of a local college and a CPA who has just joined the church. At a meeting of the audit team and the board of trustees, you learn the following. 1. The church’s board of trustees has delegated responsibility for the financial management and audit of the financial records to the finance committee. This group prepares the annual budget and approves major disbursements. It is not involved in collections or recordkeeping. No audit has been made in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years. The church does not carry any fidelity insurance. 2. The collection at the weekly service is taken by a team of ushers who volunteer to serve one month. The ushers take the collection plates to a basement office at the rear of the church. They hand their plates to the head usher and return to the church service. After all plates have been turned in, the head usher counts the cash received. The head usher then places the cash in the church safe along with a notation of the amount counted. The head usher volunteers to serve for 3 months. 3. The next morning, the financial secretary opens the safe and recounts the collection. The secretary withholds $150–$200 in cash, depending on the cash expenditures expected for the week, and deposits the remainder of the collections in the bank. To facilitate the deposit, church members who contribute by check are asked to make their checks payable to “Cash.” 4. Each month, the financial secretary reconciles the bank statement and submits a copy of the reconciliation to the board of trustees. The reconciliations have rarely contained any bank errors and have never shown any errors per books. Instructions With the class divided into groups, answer the following. (a) Indicate the weaknesses in internal accounting control over the handling of collections. (b) List the improvements in internal control procedures that you plan to make at the next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial secretary, and (4) the finance committee. (c) What church policies should be changed to improve internal control?
> A partial adjusted trial balance of Gehring Company at January 31, 2019, shows the following. Instructions Answer the following questions, assuming the year begins January 1. (a) If the amount in Supplies Expense is the January 31 adjusting entry and $1,
> The trial balance for Pioneer Advertising Inc. is shown in Illustration 3-3 (page 101). Instead of the adjusting entries shown in the text at October 31, assume the following adjustment data. 1. Supplies on hand at October 31 total $500. 2. Expired insur
> Robin Shalit, D.D.S., opened a dental practice on January 1, 2019. During the first month of operations, the following transactions occurred. 1. Performed services for patients who had dental plan insurance. At January 31, $875 of such services were perf
> The ledger of Perez Rental Agency on March 31 of the current year includes the selected accounts, shown below, before quarterly adjusting entries have been prepared. An analysis of the accounts shows the following. 1. The equipment depreciates $400 per
> Lei Company accumulates the following adjustment data at December 31. 1. Services performed but unbilled total $1,000. 2. Supplies of $300 have been used. 3. Utility expenses of $225 are unpaid. 4. Services performed of $260 collected in advance. 5. Sala
> Verne Cova Company has the following balances in selected accounts on December 31, 2019. Accounts Receivable……………………………………$ –0– Accumulated Depreciation—Equipment………….–0– Equipment…………………………………………………. 7,000 Interest Payable…………………………………………….–0– Notes Pay
> (a) Rochelle Company ships merchandise to Jay Company on December 30. The merchandise reaches the buyer on January 6. Indicate the terms of sale that will result in the goods being included in (1) Rochelle’s December 31 inventory, and (2) Jay’s December
> (a) Who are internal users of accounting data? (b) How does accounting provide relevant data to these users?
> Hart Corporation encounters the following situations: 1. Hart collects $1,300 from a customer in 2019 for services to be performed in 2020. 2. Hart incurs utility expense which is not yet paid in cash or recorded. 3. Hart’s employees worked 3 days in 201
> On numerous occasions, proposals have surfaced to put the federal government on the accrual basis of accounting. This is no small issue. If this basis were used, it would mean that billions in unrecorded liabilities would have to be booked, and the feder
> Ian Muse has prepared the following list of statements about the time period assumption. 1. Adjusting entries would not be necessary if a company’s life were not divided into artificial time periods. 2. The IRS requires companies to fi le annual tax retu
> Beyers Corporation provides security services. Selected transactions for Beyers are presented below. Oct. 1 Issued common stock in exchange for $66,000 cash from investors. 2 Hired part-time security consultant. Salary will be $2,000 per month. First day
> The accounts in the ledger of Time Is Money Delivery Service contain the following balances on July 31, 2019. Accounts Receivable $10,642 Prepaid Insurance $ 1,968 Accounts Payable 8,396 Maintenance and Repairs Expense 961 Cash ? Service Reve
> The bookkeeper for Brooks Equipment Repair made a number of errors in journalizing and posting, as described below. 1. A credit posting of $450 to Accounts Receivable was omitted. 2. A debit posting of $750 for Prepaid Insurance was debited to Insurance
> Selected transactions for Alvarado Company during its fi rst month in business are presented below. Sept. 1 Stockholders invested $10,000 cash in the business in exchange for common stock. 5 Purchased equipment for $12,000 paying $4,000 in cash and the b
> Presented below is the ledger for Higgs Co. Instructions (a) Reproduce the journal entries for the transactions that occurred on October 1, 10, and 20, and provide explanations for each. (b) Determine the October 31 balance for each of the accounts abo
> The T-accounts below summarize the ledger of Santana Landscaping Company at the end of its first month of operations. Instructions (a) Prepare the complete general journal (including explanations) from which the postings to Cash were made. (b) Prepare
> Selected transactions from the journal of Kati Tillman, investment broker, are presented below. Instructions (a) Post the transactions to T-accounts. (b) Prepare a trial balance at August 31, 2019. Date Account Titles and Explanation Ref. Debit Cre
> Both the gross profit method and the retail inventory method are based on averages. For each method, indicate the average used, how it is determined, and how it is applied.
> Meghan Selzer has prepared the following list of statements about the general ledger. 1. The general ledger contains all the asset and liability accounts, but no stockholders’ equity accounts. 2. The general ledger is sometimes referred to as simply the
> On April 1, Adventures Travel Agency, Inc. began operations. The following transactions were completed during the month. 1. Stockholders invested $24,000 in the business in exchange for common stock. 2. Obtained a bank loan for $7,000 by issuing a note p
> Selected transactions for Sophie’s Dog Care are as follows during the month of March. March 1 Paid monthly rent of $1,200. 3 Performed services for $140 on account. 5 Performed services for cash of $75. 8 Purchased equipment for $600. The company paid c
> Leppard Enterprises had the following selected transactions. 1. Kim Leppard invested $5,000 cash in the business in exchange for common stock. 2. Paid office rent of $950. 3. Performed consulting services and billed a client $4,700. 4. Declared and paid
> Fredo Industries had the following transactions. 1. Borrowed $5,000 from the bank by signing a note. 2. Paid $2,500 cash for a computer. 3. Purchased $450 of supplies on account. Instructions (a) Indicate what accounts are increased and decreased by eac
> Transaction data for Lexington Real Estate Agency are presented in E2-4. Reference Data E2-4: Oct. 1 Diane Lexington begins business as a real estate agent with a cash investment of $20,000 in exchange for common stock. 2 Hires an administrative as
> Presented below is information related to Lexington Real Estate Agency. Oct. 1 Diane Lexington begins business as a real estate agent with a cash investment of $20,000 in exchange for common stock. 2 Hires an administrative assistant. 3 Purchases of
> Data for L. Takemoto, interior decorating, are presented in E2-2. Reference Data E2-2: Jan. 2 Stockholders invested $15,000 cash in the business in exchange for common stock. 3 Purchased used car for $8,200 cash for use in the business. 9 Purchased s
> Selected transactions for L. Takemoto, an interior decorating firm, in its first month of business, are shown below. Jan. 2 Stockholders invested $15,000 cash in the business in exchange for common stock. 3 Purchased used car for $8,200 cash for use in
> Faith Dillon has prepared the following list of statements about accounts. 1. An account is an accounting record of either a specific asset or a specific liability. 2. An account shows only increases, not decreases, in the item it relates to. 3. Some ite
> What is the economic entity assumption? Give an example of its violation.
> The statement of cash flows classifies each transaction as an operating activity, an investing activity, or a financing activity. Operating activities are the types of activities the company performs to generate profits. Investing activities include the
> This information is for Paulo Company for the year ended December 31, 2019. Cash received from revenues from customers………$600,000 Cash received for issuance of common stock…………..280,000 Cash paid for new equipment…………………………………..115,000 Cash dividends pa
> Wyco Park, a public camping ground near the Four Corners National Recreation Area, has compiled the following financial information as of December 31, 2019. Revenues during 2019—camping fees $140,000 Notes payable $ 60,000 Revenues during 2019—ge
> The following information relates to La Greca Co. for the year 2019. Retained earnings, January 1, 2019 $48,000 Advertising expense $ 1,800 Dividends during 2019 5,000 Rent expense 10,400 Service revenue 62,500 Utilities exp
> Two items are omitted from each of the following summaries of balance sheet and income statement data for two corporations for the year 2019, Plunkett Co. and Herring Enterprises. Instructions Determine the missing amounts. Plunkett Herring Enterpr
> Toth Company had the following assets and liabilities on the dates indicated. Toth began business on January 1, 2018, with an investment of $100,000 from stockholders. Instructions From an analysis of the change in stockholders’ equi
> An analysis of transactions for Foley & Co. was presented in E1–8. Assume that August is the company’s first month of business. Reference Figure E1-8: Instructions Prepare an income statement and a retained earn
> An analysis of the transactions made by Foley & Co., a certified public accounting firm, for the month of August is shown below. Each increase and decrease in stockholders’ equity is explained. Instructions (a) Describe each trans
> Keystone Computer Timeshare Company entered into the following transactions during May 2019. 1. Purchased computers for $20,000 from Data Equipment on account. 2. Paid $3,000 cash for May rent on storage space. 3. Received $15,000 cash from customers for
> Selected transactions for Verdent Lawn Care Company are as follows. 1. Sold common stock for cash to start business. 2. Paid monthly rent. 3. Purchased equipment on account. 4. Billed customers for services performed. 5. Paid dividends. 6. Received cash
> “When perpetual inventory records are kept, the results under the FIFO and LIFO methods are the same as they would be in a periodic inventory system.” Do you agree? Explain.
> Bailey Cleaners has the following balance sheet items. Accounts payable………………Accounts receivable Cash…………………………………………Notes payable Equipment……………Salaries and wages payable Supplies…………………………………..Common stock Instructions Classify each item as an asset,
> The following situations involve accounting principles and assumptions. 1. Tina Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Tina reports the buildings at fair valu
> Sam Cresco, president of Cresco Company, has instructed Sharon Gross, the head of the accounting department for Cresco Company, to report the company’s land in the company’s accounting reports at its fair value of $170,000 instead of its cost of $100,000
> (a) The following are users of financial statements. ______ Customers ______ Securities and Exchange Commission ______ Internal Revenue Service ______ Store manager ______ Labor unions ______ Suppliers ______ Marketing manager ______ Vice preside
> Callison Company performs the following accounting tasks during the year. ______ Analyzing and interpreting information. ______ Classifying economic events. ______ Explaining uses, meaning, and limitations of data. ______ Keeping a systematic chronologic
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin. cfm to log in and prepare responses to the following. (a) How is cash defined in the Codification? (b) How are cash equivalents defined in the Codification? (c)
> You are the assistant controller in charge of general ledger accounting at Linbarger Bottling Company. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at $200,000
> As a new auditor for the CPA firm of Eaton, Quayle, and Hale, you have been assigned to review the internal controls over mail cash receipts of Pritchard Company. Your review reveals the following. Checks are promptly endorsed “For Deposit Only,” but no
> All organizations should have systems of internal control. Universities are no exception. This site discusses the basics of internal control in a university setting. Address: www.bc.edu/offices/audit/controls Steps: Go to the site shown above. Instructi
> Josh Kuchin is studying for the next accounting midterm examination. What should Josh know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of “net realizable value” in the lower-of-cost-or-net realizable value
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes t
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca- Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A.
> If your school has a subscription to the FASB Codifi cation, go to http://aaahq.org/ascLogin. cfm to log in and prepare responses to the following. Instructions (a) The primary basis for accounting for inventories is cost. How is cost defined in the Cod
> Some of the largest business frauds ever perpetrated have involved the misstatement of inventory. Two classics were at Leslie Fay and McKesson Corporation. Instructions There is considerable information regarding inventory frauds available on the Intern
> R. J. Graziano Wholesale Corp. uses the LIFO method of inventory costing. In the current year, profit at R. J. Graziano is running unusually high. The corporate tax rate is also high this year, but it is scheduled to decline significantly next year. In a
> You are the controller of Small Toys Inc. Marta Johns, the president, recently mentioned to you that she found an error in the 2018 financial statements which she believes has corrected itself. She determined, in discussions with the Purchasing Departmen
> On April 10, 2019, fi re damaged the office and warehouse of Corvet Company. Most of the accounting records were destroyed, but the following account balances were determined as of March 31, 2019: Inventory (January 1, 2019), $80,000; Sales Revenue (Janu
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes t
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca-Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the f
> Davey Company has been using the FIFO cost flow method during a prolonged period of inflation. During the same time period, Davey has been paying out all of its net income as dividends. What adverse effects may result from this policy?
> The notes that accompany a company’s financial statements provide informative details that would clutter the amounts and descriptions presented in the statements. Refer to the financial statements of Apple Inc. in Appendix A as well as its annual report.
> If your school has a subscription to the FASB Codifi cation, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Instructions (a) Access the glossary (“Master Glossary”) to answer the following: (1) What is the definiti
> There are many situations in business where it is difficult to determine the proper period in which to record revenue. Suppose that after graduation with a degree in finance, you take a job as a manager at a consumer electronics store called Impact Elect
> Jacquie Boynton was just hired as the assistant treasurer of Key West Stores. The company is a specialty chain store with nine retail stores concentrated in one metropolitan area. Among other things, the payment of all invoices is centralized in one of t
> The following situation is in chronological order. 1. Connor decides to buy a surfboard. 2. He calls Surfing USA Co. to inquire about its surfboards. 3. Two days later, he requests Surfing USA Co. to make a surfboard. 4. Three days later, Surfing USA Co.
> Three years ago, Dana Mann and her brother-in-law Eric Boldt opened Family Department Store. For the first two years, business was good, but the following condensed income results for 2018 were disappointing. Dana believes the problem lies in the relat
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. (Use Wal-Mart’s January 31, 2016, financial statements for comparative purposes.) Instructions for accessing a
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca- Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A.
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin. cfm to log in and prepare responses to the following. Instructions (a) Access the glossary (“Master Glossary”) at the FASB Codifi cation website to answer the f
> In a period of rising prices, the inventory reported in Gumby Company’s balance sheet is close to the current cost of the inventory, whereas Pokey Company’s inventory is considerably below its current cost. Identify the inventory cost flow method being u
> Companies prepare balance sheets in order to know their financial position at a specific point in time. This enables them to make a comparison to their position at previous points in time, and gives them a basis for planning for the future. In order to e
> As the controller of Take No Prisoners Perfume Company, you discover a misstatement that overstated net income in the prior year’s financial statements. The misleading financial statements appear in the company’s annual report which was issued to banks a
> The accounting cycle is important in understanding the accounting process. Instructions Write a memo to your instructor that lists the steps of the accounting cycle in the order they should be completed. End with a paragraph that explains the optional s
> White gloves Janitorial Service was started 2 years ago by Lynn Sanders. Because business has been exceptionally good, Lynn decided on July 1, 2019, to expand operations by acquiring an additional truck and hiring two more assistants. To finance the expa
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes t
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca-Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the f
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A.
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/asclogin. cfm to log in and prepare responses to the following. Instructions Access the glossary (“Master Glossary”) to answer the following. (a) What is the definition o
> Many companies have potential pollution or environmental-disposal problems—not only for electronic gadgets, but also for the lead paint or asbestos they sold. How do we fit these issues into the accounting equation? Are these costs and related liabilitie
> Companies must report or disclose in their financial statements information about all liabilities, including potential liabilities related to environmental cleanup. There are many situations in which you will be asked to provide personal financial inform
> (a) What is the term used to describe the owners’ equity section of a corporation? (b) Identify the two owners’ equity accounts in a corporation and indicate the purpose of each.
> Kellner Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Kellner’s chemical pesticides. In the coming year, Kellner will have environmentally safe and competitive
> In reviewing the accounts of Gloria Jean Co. at the end of the year, you discover that adjusting entries have not been made. Instructions Write a memo to Gloria Jean Hall, the owner of Gloria Jean Co., that explains the following: the nature and purpos
> Happy Camper Park, Inc. was organized on April 1, 2018, by Barbara Evans. Barbara is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Barbara prepared the following income statement for the quarter that end
> The July 6, 2011, edition of the Wall Street Journal Online includes an article by Michael Rapoport entitled “U.S. Firms Clash Over Accounting Rules.” The article discusses why some U.S. companies favored adoption of International Financial Reporting Sta
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes t
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca- Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A.
> Auditors provide a type of certification of corporate financial statements. Certification is used in many other aspects of business as well. For example, it plays a critical role in the sustainability movement. The February 7, 2012, issue of the New York
> If you haven’t already done so, in the not-too-distant future you will prepare a résumé. In some ways, your résumé is like a company’s annual report. Its purpose is to enable others to evaluate your past, in an effort to predict your future. A résumé is
> Meredith Ward is the assistant chief accountant at Frazier Company, a manufacturer of computer chips and cellular phones. The company presently has total sales of $20 million. It is the end of the first quarter. Meredith is hurriedly trying to prepare a
> Define current assets. What basis is used for arranging individual items within the current assets section?
> Keller’s Maid Company offers home-cleaning service. Two recurring transactions for the company are billing customers for services performed and paying employee salaries. For example, on March 15, bills totaling $6,000 were sent to customers and $2,000 wa
> Dyanna Craig operates Craig Riding Academy. The academy’s primary sources of revenue are riding fees and lesson fees, which are paid on a cash basis. Dyanna also boards horses for owners, who are billed monthly for boarding fees. In a f
> The January 27, 2011, edition of the New York Times contains an article by Richard Sandomir entitled “N.F.L. Finances, as Seen Through Packers’ Records.” The author of the article discusses the fact that the Green Bay Packers are the only NFL team that p
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, inc
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca- Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including
