Ken Jones is the purchasing agent for Werner and his uncle owns a retail hardware store. Jones arranged for hardware to be delivered by manufacturers to the retail store on a cash-on-delivery (COD) basis, thereby enabling his uncle to buy at wholesale prices. Jones was probably able to accomplish this because of Werner's poor internal control over 4 cash receipts. purchase requisitions. perpetual inventory records. purchase orders.

Ken Jones is the purchasing agent for Werner and his uncle owns a retail hardware store. Jones arranged for hardware to be delivered by manufacturers to the retail store on a cash-on-delivery (COD) basis, thereby enabling his uncle to buy at wholesale prices. Jones was probably able to accomplish this because of Werner's poor internal control over 4 cash receipts. purchase requisitions. perpetual inventory records. purchase orders.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Budd, the purchasing agent of Lake Hardware Wholesalers, has a relative who owns a retail hardware store. Budd arranged for hardware to be delivered by manufacturers to the retail store on a cash-on-delivery (C.O.D.) basis, thereby enabling his relative to buy at Lake’s wholesaleprices. Budd was probably able to accomplish this because of Lake’s poor internal control overa. Purchase requisitions.b. Cash receipts.c. Perpetual inventory records.d. Purchase orders.
Mighty Tools Hardware runs a network of small hardware retail outlets across the state. All salesare made for cash or on credit card and processed through electronic tills. A wide range of goodsare stocked by the stores, meaning that the business deals with a large number of suppliers. Allgoods are purchased on credit with varying terms, depending on the supplier. Invoices are paidby cheque after a package of documents is collated and approved for payment. Ordering of goodsand subsequent payments are processed by the central office with delivery direct from supplierto the stores — no central warehouse is used. Mighty Tools uses a perpetual stock system andconducts test counts at regular periods throughout the year.Required:(a) What controls should exist for inventory movements at the local store level and the centraloffice? (150-180 words)(b) Explain how the stocktake for Mighty Tools Hardware should be audited. What details aremost important? (230-250 words)
Mighty Tools Hardware runs a network of small hardware retail outlets across the state. All sales are made for cash or on credit card and processed through electronic tills. A wide range of goods are stocked by the stores, meaning that the business deals with a large number of suppliers. All goods are purchased on credit with varying terms, depending on the supplier. Invoices are paid by cheque after a package of documents is collated and approved for payment. Ordering of goods and subsequent payments are processed by the central office with delivery direct from supplier to the stores — no central warehouse is used. Mighty Tools uses a perpetual stock system and conducts test counts at regular periods throughout the year. Required: (a) What controls should exist for inventory movements at the local store level and the central office? (b) Explain how the stocktake for Mighty Tools Hardware should be audited. What details are most important?
Mighty Tools Hardware runs a network of small hardware retail outlets across the state. All sales are made for cash or on credit card and processed through electronic tills. A wide range of goods are stocked by the stores, meaning that the business deals with a large number of suppliers. All goods are purchased on credit with varying terms, depending on the supplier. Invoices are paid by cheque after a package of documents is collated and approved for payment. Ordering of goods and subsequent payments are processed by the central office with delivery direct from supplier to the stores — no central warehouse is used. Mighty Tools uses a perpetual stock system and conducts test counts at regular periods throughout the year. Required: What controls should exist for inventory movements at the local store level and the central office? Explain how the stocktake for Mighty Tools Hardware should be audited. What details are most important?
A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? Group of answer choices 1.The person in accounts payable should generate the purchase order. 2.The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. 3.No changes would be made since the person paying the bills is different from the person ordering the inventory. 4.The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.
When Mookie The Beagle Concierge started stocking Mookie The Beagle Concierge branded inventory. Cy rented a centrally located storage locker with digital access. This permits Mookie The Beagle Concierge contractors to access the storage locker for deliveries to customers. Cy has digital surveillance and from his smartphone can electronically permit the contractors access when they arrive at the storage locker. In addition, all inventory has an RFID chip that is automatically read when the contractor passes the storage locker door to exit. This feature improves inventory control in that Cy is immediately notified on his smartphone when any inventory is removed from the storage locker. The storage locker streamlines operations. The only issue is that Cy overlooked recording the storage locker rental in QBO. Complete the following adjusting entry for Mookie The Beagle Concierge. In anticipation of stocking Mookie The Beagle Concierge branded inventory. Cy charged $864 for 6 months…
1.Which of the following statements are true?a. Recording purchase transactions in a general journal is considered efficient.b. Most businesses will carefully enter all purchase orders using the purchase orderjournal.c. A purchase requisition follows a purchase order.d. It is important for a company to verify all numbers on a supplier’s invoicee. In general, cash discounts are so minor they can be ignored. From the following, prepare a Schedule of Accounts Payable for Digital Co. for September 30, 2022. Account payable 210 Credit 100 9/5 GJ4 200 9/7 GJ5 300 9/15 GJ6 800 9/18 GJ6 L VON CO. CREDIT 100 9/5 GJ4 XON CO. CREDIT 300 9/15 GJ6 J. BEE CO. CREDIT 800 9/18 GJ6 ZERO CO. CREDIT 200 9/7 GJ5
The following describes the purchases and cash disbursements procedures for a lawn and garden supply wholesaler that uses central computer system terminals with in departments. The inventory control clerk visually reviews inventory levels from his computer terminal to identify items that need to be ordered. He then prints and sends a hard copy purchase requisition for the needed items to the purchasing agent. Based on the requisi- tion, the purchasing agent selects a vendor and adds a digital record to the purchase order file from terminal in the purchasing department. The clerk then prints a hard copy of the purchase order and mails it to the vendor. Finally, the purchasing agent destroys the purchase requisition, which it is no longer niceded since the relevant details are on the PO. When the materials arrive at the receiving department a receiving clerk prints a copy of the purchase order from his terminal and reconciles to the packing slip. The clerk then manually creates wo-part…
You are the auditor for Konerko’s Office Supply Store, which is opening for business next week. The store owner has established all the controls you have recommended for ensuring that sales are recorded properly and cash is accounted for. The owner has heard from other small business owners that employees often used returned goods as means of skimming money from the register.Required:a. How might an employee use returned goods to skim money from the register?b. What controls would you recommend to prevent or detect fraudulent returns?c. What audit procedures might you perform to detect fraudulent returns?
Feinman Computers sells desktop computer systems that it manufactures from parts and software that thirdparty vendors provide. Customers are both private consumers and small businesses. Consumers pay cash or by credit card, but business customers buy on credit. A credit check is made of all new business customers before approving a line of credit. Sales are made online or by a hard-copy order document that customers mail or fax to the company.When a credit order is received, the sales clerk verifies inventory availability, prepares a sales order and sends the stock release copy to Willy, a warehouse employee who picks the goods and arranges shipment. Willy then prepares the bills of lading and shipping notices. Barb in the billing department receives the shipping notice from Willy and updates the inventory subsidiary ledger to account for the reduction in inventory. Barb files the stock release, prepares the invoice, and mails a copy of it to the customer. Barb then updates the sales…
Precision Industries, Inc., is a manufacturer of electronic components. When a purchase order is received from a customer, a sales clerk prepares a serially numbered sales order and sends copies to the shipping and accounting departments. When the merchandise is shipped to the customer, the shipping department prepares a serially numbered shipping advice and sends a copy to the accounting department. Upon receipt of the appropriate documents, the accounting department records the sale in the accounting records. All shipments are FOB shipping point. How can the auditors determine whether Precision Industries, Inc., has made a proper year-end cutoff of sales transactions?
Precision Industries, Inc., is a manufacturer of electronic components. When a purchase order is received from a customer, a sales clerk prepares a serially numbered sales order and sends copies to the shipping and accounting departments. When the merchandise is shipped to the customer, the shipping department prepares a serially numbered shipping advice and sends a copy to the accounting department. Upon receipt of the appropriate documents, the accounting department records the sale in the accounting records. All shipments are FOB shipping point. Assume that all shipments for the first five days of the following year were recorded as occurring in the current year. If not corrected, what effect will this cutoff error have upon the financial statements for the current year?