acc103 ch6 hw

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Harvard University *

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103

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Accounting

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Feb 20, 2024

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Uploaded by LieutenantDragon138

Indicate which statements are true and which are false. & Answer is complete and correct. 1. Separation of recordkeeping for assets from the custody over assets helps reduce fraud. True <o 2. The primary objective of internal control procedures is to safeguard the business against theft from e & government agencies. 3. Internal control procedures should be designed to protect assets from waste and theft. True o 4. Separating the responsibility for a transaction between two or more individuals or departments will e o not help prevent someone from creating a fictitious invoice and paying the money to him/herself. Indicate the COSO component that matches with each of the following internal control activities. & Answer is complete and correct. Internal control activities COSO components a. Independent review of controls. Monitoring (V] b. Executives' strong ethics. Control environment o c. Reporting of control L . effectiveness. Information and communication @ d. Analyses of fraud risk factors. Risk assessment < Identify the fraud triangle risk factor in each situation. & Answer is complete and correct. Situation Fraud triangle risk factor 1. Employees are told to report increased income or be fired. Pressure 2. Several salesclerks share the same cash drawer. Opportunity 3. Aworker did not receive a bonus this year and now feels it's okay to use the company credit card for personal expenses. 4. Doors safeguarding valuable merchandise are not locked with a passcode. Opportunity Rationalization 00000 5. An employee feels underpaid and believes stealing inventory is justified. Rationalization Choose from the list of terms and phrases to best complete the following statements. @ Answer is complete and correct. 1. The category includes currency, coins, and deposits in bank accounts. cash (V] 2. The term refers to a company'’s ability to pay for its current liabilities. liquidity (] 3. The category includes short-term, highly liquid investment assets that are readily convertible to a known cash amount et e o and sufficiently close to their due dates so that their market value will not greatly change. q

A table for a monthly bank reconciliation dated September 30 is given below. For each item 1through 12, indicate whether the item should be added to or subtracted from the book or bank balance, and whether it should or should not appear on the reconciliation. (Select the answers in the appropriate cells. Leave no cells blank. Be certain to select "NA" in fields which are not applicable.) & Answer is complete and correct. ’ (I:);l:’iitt(t); ’ Shown or Not Item Bank Balance Book Balance Cash Shown.'\.or] e Reconciliation lég;sazni'_]e(:k from a customer is shown on the bank statement but not yet recorded by the NA @ |subtract @ |Credit @ |shown [ 2. Interest earned on the September cash balance in the bank is not yet recorded by the company. NA @ |Add @ |Debit @ [Shown (V] 3. Deposit made on September 5 and processed by the bank on September 6. NA @ (NA @ (NA @ [Not Shown (V] 4. Checks written by another depositor but mistakenly charged against this company’s account. Add @ (NA @ (NA @ [Shown (V] 5. Bank service charge for September is not yet recorded by the company. NA @ |[Subtract @ |[Credit @ [Shown (] 6. Checks outstanding on August 31 that cleared the bank in September. NA @ (NA @ |NA @ [Not Shown (V] ;y(Er?:zlgnvrglgs;':?:égs;;;gisgrpany s account and cleared by the bank; erroneously not recorded NA @ |subtract @ |Credit @ |shown ) EO,; Sg:]? -recelvable is collected by the bank for the company, but it is not yet recorded by the NA @ |Add @ | Debit @ | shown ) 9. Checks written and mailed to payees on October 2. NA @ |NA @ |NA @ | Not Shown o 10. Checks written by the company and mailed to payees on September 30. Subtract @ |NA @ NA @ |Shown 9 11. Night deposit made on September 30 after the bank closed. Add @ (NA @ (NA @ [Shown (V] 12. Bank fees for check printing are not yet recorded by the company. NA @ |Subtract @ |Credit @ [Shown (/] Required information [The following information applies to the questions displayed below.] Del Gato Clinic's cash account shows an $11,589 debit balance and its bank statement shows $10,555 on deposit at the close of business on June 30. a. Outstanding checks as of June 30 total $1,829. b. The June 30 bank statement lists a $16 bank service charge. c. Check No. 919, listed with the canceled checks, was correctly drawn for $467 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $476. d. The June 30 cash receipts of $2,856 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement. Prepare its bank reconciliation using the above information. @& Answer is complete and correct. DEL GATO CLINIC B Bank Reconciliation o — June 30 o Bank statement balance |$ 10,555 O Book balance |$ 11,589 Q Add: Add: Depositof June30 @[5 2856 @ Error on Check Number 919 @ [$ 9@ 2,856 9 13,411 11,598 Deduct: Deduct: Outstanding checks & 1829 Bank service charge (] 168 1,829 16 Adjusted bank balance $ 11582 Adjusted book balance $ 11,582

Del Gato Clinic's cash account shows an $11,589 debit balance and its bank statement shows $10,555 on deposit at the close of business on June 30. a. Outstanding checks as of June 30 total $1,829. b. The June 30 bank statement lists a $16 bank service charge. c. Check No. 919, listed with the canceled checks, was correctly drawn for $467 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $476. d. The June 30 cash receipts of $2,856 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement. \ Prepare any necessary journal entries that Del Gato Clinic must record as a result of preparing the bank reconciliation. (If no entry required for a transaction/event, select "No journal entry required" in the first account field.) @ Answer is complete and correct. [No Transaction General Journal Debit Credit j 1 a. No journal entry required (V] 2 b. Miscellaneous expenses (V] 168 Cash ) 16 @ 3 c. Cash <o & Utilities expense (] 9@ 4 d. No journal entry required (] Wright Company’s cash account shows a $27,500 debit balance and its bank statement shows $25,800 on deposit at the close of business on May 31. a. The May 31 bank statement lists $100 in bank service charges; the company has not yet recorded the cost of these services. b. Outstanding checks as of May 31 total $5,600. c. May 31 cash receipts of $6,200 were placed in the bank’s night depository after banking hours and were not recorded on the May 31 bank statement. d. In reviewing the bank statement, a $400 check written by Smith Company was mistakenly drawn against Wright's account. e. The bank statement shows a $600 NSF check from a customer; the company has not yet recorded this NSF check. Prepare its bank reconciliation using the above information. & Answer is complete and correct. WRIGHT COMPANY [ Bank Reconciliation - [ May 31 o Bank statement balance |$ 25,800 @ [Book balance $ 275008 Add: Add: Deposit of May 31 Q5 6208 Bank error (] 400 & 6,600 32,400 27,500 Deduct: Deduct: Outstanding checks Q5 56009 Bank servicecharge @[5 1008 NSF check (] 600 & 5,600 700 Adjusted bank balance $ 26,800 Adjusted book balance $ 26,800

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Following are five separate cases involving internal control issues. Required: 1. For each case, identify the principle(s) of internal control that is violated. @ Answer is complete and correct. a. Chi Han receives all incoming customer cash receipts for her employer and posts the customer payments to their respective accounts. b. At Tico Company, Julia and Trevor alternate lunch hours. Julia is the petty cash custodian, but if someone needs petty cash when she is at lunch, Trevor fills in as custodian. c. Nori Nozumi posts all patient charges and payments at the Hopeville Medical Clinic. Each night Nori backs up the computerized accounting system but does not password lock her computer. d. Ben Shales prides himself on hiring quality workers who require little supervision. As office manager, Ben gives his employees full discretion over their tasks and for years has seen no reason to perform independent reviews of their work. Separate recordkeeping from custody of assets. Establish responsibilities. Apply technological controls. e 0/0|0 Perform regular and independent reviews. e. Carla Farah's manager has told her to reduce costs. Carla decides to raise the deductible on the plant’s property insurance from $5,000 to $10,000. This cuts the property insurance premium in half. In a related move, she decides that bonding the plant's employees is a waste of money because the company has not experienced any losses due to employee theft. Carla saves the entire amount of the bonding insurance premium by dropping the bonding insurance. o Insure assets and bond key employees. The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31. a. On July 31, the company’s Cash account has a $27,497 debit balance, but its July bank statement shows a $27,233 cash balance. b. Check Number 3031 for $1,482, Check Number 3065 for $382, and Check Number 3069 for $2,281 are outstanding checks as of July 31. c. Check Number 3056 for July rent expense was correctly written and drawn for $1,270 but was erroneously entered in the accounting records as $1,250. d. The July bank statement shows the bank collected $7,955 cash on a note for Branch. Branch had not recorded this event before receiving the statement. e. The bank statement shows an $805 NSF check. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF. f. The July statement shows a $25 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received. g. Branch's July 31 daily cash receipts of $11,514 were placed in the bank's night depository on that date but do not appear on the July 31 bank statement. equired: Prepare the bank reconciliation for this company as of July 31. & Answer is complete and correct. - BRANCH COMPANY : Bank Reconciliation : B July 31 3ank statement balance |$ 27,233 @ | Book balance lS 27,497 @ Add: Add: Proceeds from note Qs 79559 Deposit of July 31 @ 1514@Q| 11514 7,955 38,747 35,452 Jeduct: Deduct: Check Number 3031 Q@ 1420 NSF check (V] 805 @ Check Number 3065 (] 3829 Service charge (v] 59 Check Number 3069 (/] 22818 Error (Check 3056) Qo 209 4,145 850 Adjusted bank balance $ 34602 Adjusted book balance S 34,602

2. Prepare the journal entries necessary to make the company’s book balance of cash equal to the reconciled cash balance as of July 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) @ Answer is complete and correct. [No Transaction General Journal Debit Credit J 1 a. No journal entry required 2 b. No journal entry required 3 c. Rent expense 209 Cash 209 4 d. Cash 7955 @ Notes receivable 7955 @ Q OO0 OO0 Q0 00 o © 5 e. Accounts receivable—E. Shaw 805 @ Cash 805@ 6 f. Miscellaneous expenses 59 Cash 259 7 g. No journal entry required CH 5 VALUE INVENTORY QUIZ A company's inventory records indicate the following data for the month of January: Date Activities Units Acquired at Cost Units Sold at Retail January 1 Beginning inventory 360 units @ $18 = $6,480 January 8 Purchase 340 units @ $20 = $6,800 January 12 Sale 600 units @ $70 January 17 Purchase 400 units @ $22 = $8,800 January 23 Sale 300 units @ $70 January 28 Purchase 460 units @ $24 = $11,040 If the company uses the LIFO perpetual inventory system, what is the value of cost of goods sold? Multiple Choice O $15,040. $12,480. $18,080. $20,640. O O |@f O $17,680.

A company's inventory records indicate the following data for the month of January: Date Activities Units Acquired at Cost Units Sold at Retail January 1 Beginning inventory 360 units @ $18 = $6,480 January 8 Purchase 340 units @ $20 = $6,800 January 12 Sale 600 units @ $70 January 17 Purchase 400 units @ $22 = $8,800 January 23 Sale 300 units @ $70 January 28 Purchase 460 units @ $24 = $11,040 If the company uses the LIFO perpetual inventory system, what would be the cost of the ending inventory? Multiple Choice . $15,040. O $18,080. O $17.480. O $12,480. O $6,600. A company's inventory records indicate the following data for the month of January: Date Activities Units Acquired at Cost Units Sold at Retail January 1 Beginning inventory 360 units @ $18 = $6,480 January 8 Purchase 340 units @ $20 = $6,800 January 12 Sale 600 units @ $70 January 17 Purchase 400 units @ $22 = $8,800 January 23 Sale 300 units @ $70 January 28 Purchase 460 units @ $24 = $11,040 If the company uses the LIFO periodic inventory system, what is the value of cost of goods sold? Multiple Choice $17,680. $20,640. $15,040. $12,480. O O O @ O $18,080.

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A company's inventory records indicate the following data for the month of April: Date Activities Units Acquired at Cost Units Sold at Retail April 1 Beginning inventory 700 units @ $36 = $25,200 April 7 Purchase 580 units @ $40 = $23,200 April 11 Sale 1,000 units @ $110 April 16 Purchase 500 units @ $44 = $22,000 April 22 Sale 400 units @ $110 April 29 Purchase 480 units @ $50 = $24,000 If the company uses the first-in, first-out (FIFO) method and the perpetual inventory system, what is the value of cost of goods sold? Multiple Choice O $16,480. . $36,800. O $40720. O $57,600. O $53,680. A company had the following purchases and sales during the month of November: Date Activities Units Acquired at Cost Units Sold at Retail November 1 Beginning inventory 5 units @ $24 = $120 November 2 Purchase 10 units @ $26 = $260 November 6 Purchase 6 units @ $29 = $174 November 8 Sales 8 units @ $61 Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale? Multiple Choice () s $332 $328 $348 $364 O O |@f O

A company had the following purchases and sales during its first month of operations: Date Activities Units Acquired at Cost Units Sold at Retail January 1 Purchase 10 units @ $4.00 = $40.00 January 9 Sales 6 units @ $12.00 January 17 Purchase 8 units @ $5.50 = $44.00 January 27 Sales 7 units @ $12.00 Using the perpetual weighted average method, what is the value of cost of goods sold? (Round weighted average costs per unit to 2 decimal places.) Multiple Choice O $24.00. $2335. $25.00. $59.00. $40.00. O O O @