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(a)
Internal Control procedures:
The internal control procedures are the one which is necessary for controlling the sales transaction and it helps in detecting the defects or mistakes in the recording of the sales. It helps in measuring and obtaining the goals of business with effectiveness and efficiency.
To calculate:
The indication from large returns and allowances of sales.
(b)
Internal Control procedures:
The internal control procedures are the one which is necessary for controlling the sales transaction and it helps in detecting the defects or mistakes in the recording of the sales. It helps in measuring and obtaining the goals of business with effectiveness and efficiency.
To calculate:
The procedure to protect the company Johnson Tires from the manager like Kevin.
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Chapter 5 Solutions
Cornerstones of Financial Accounting
- On December 1, 2019, AwakcAllNight Inc. sells 5,000 super caffeinated candy bars to Campus Grocers. The candy bars sell for 3 per bar. In addition, AwakcAllNight pays Campus Grocers a 900placement fee to ensure that its candy bars are always stocked prominently by the cash register. The 900 is paid at the end of each month based on the results of random inspections of Campus Grocers by AwakcAllNight to ensure that the terms of the contract are being followed. Required: 1. Determine the transaction price for Awake AllNights revenue contract. 2. Prepare AwakeAllNights journal entries to recognize sales revenue and pay Campus Grocers the placement fee.arrow_forwardPRACTICE PROBLEM Listed below are selected transactions of Scultz Department Store for the current year ending December 31. On December 5, the store received $500 from the Jackson Players as a deposit to be returned after certain furniture to be used in stage production was returned on January 15. During December, cash sales totaled $798,000, which includes the 5% sales tax that must be remitted to the state by the fifteenth day of the following month. On December 10, the store purchased for cash three delivery trucks for $120,000. The trucks were purchased in a state that applies a 5% sales tax. The store determined it will cost $100,000 to restore the area (considered a land improvement) surrounding one of its store parking lots, when the store is closed in 2 years. Schultz’ estimates the fair value of the obligation at December 31 is $84,000. As a result of uninsured accidents during the year, personal injury suits for $350,000 and $60,000 have been filed against the…arrow_forwardThe AAA Branch of SSS Company provided the following information related to its operations for the last quarter of 2020: The store sold 15,000 units at P78.00 each, after having purchased the units from various suppliers for P45.15. AAA Branch's salespeople are paid a 5% commission based on gross sales pesos. AAA sales manager oversees the placement of local advertising contracts, which totaled P154,000 for the year. Local property taxes amounted to P18,600. The sales manager's P25,000 monthly salary is set by AAA's store manager. In contrast, the store manager's P50,000 monthly salary is determined by SSS Company's vice president. AAA incurred last quarter an P16,800 of other noncontrollable costs along with P10,000 of income tax expense. ! Nontraceable (common) company overhead totaled P58,000 during the period. sss Company's corporate headquarter is located in New York and the company uses responsibility accounting to evaluate performance. Required: Prepare a segmented income…arrow_forward
- Geaham Company projects the following sales for the first three months of the year: $12.600 in January $16,100 in February, and $11,100 in March The company expects 60% of the sales to be cash and the remainder on account. Sales on account are collected 50% in the month of the sale and 50% in the following month. The Accounts Receivable account has a zero balance on January 1. Round to the nearest dolar Read the requirements Requirement 1. Prepare a schedule of cash receipts for Graham for January, February, and March. What is the balance in Accounts Receivable on March 31? (Leave unused and zero balance account cels blank, do not enter "0) Cash Receipts from Customers January February March Total Total sales February January March Total Cash Receipts from Customers Accounts Receivable balance, January 1 January-Cash sales January-Credit sales, collection of January sales in January January-Credt sales, collection of January sales in February February-Cesh sales February-Credt sales,…arrow_forwardOne Stop Electrical Shop are merchandisers of household fixtures & fittings. The business began the last quarter of 2020 (October to December) with 25 Starburst Wall Clocks at a total cost of $153,000. The following transactions took place during the quarter.October 10 100 clocks were purchased on account at a cost of $6,225 each. In addition, One Stop paid $120 cash on each clock to have the inventory shipped from the vendor’s warehouse to their warehouseOctober 31 During the month 90 clocks were sold at a price of $8,300 each. (20 of these clocks sold were on account to a long-standing customer of the business)November 1 A new batch of 60 clocks was purchased at a total cost of $406,500November 10 5 of the clocks purchased on November 1 were returned to the supplier, as they were damagedNovember 30 The sales for November were 58 clocks which yielded total sales revenue of $498,800December 2 Owing to increased demand, a further 110 clocks were purchased at a cost of $7,400 each…arrow_forwardOne Stop Electrical Shop are merchandisers of household fixtures & fittings. The business began the last quarter of 2020 (October to December) with 25 Starburst Wall Clocks at a total cost of $153,000. The following transactions took place during the quarter.October 10 100 clocks were purchased on account at a cost of $6,225 each. In addition, One Stop paid $120 cash on each clock to have the inventory shipped from the vendor’s warehouse to their warehouseOctober 31 During the month 90 clocks were sold at a price of $8,300 each. (20 of these clocks sold were on account to a long-standing customer of the business)November 1 A new batch of 60 clocks was purchased at a total cost of $406,500November 10 5 of the clocks purchased on November 1 were returned to the supplier, as they were damagedNovember 30 The sales for November were 58 clocks which yielded total sales revenue of $498,800December 2 Owing to increased demand, a further 110 clocks were purchased at a cost of $7,400 each…arrow_forward
- Duke Company pays its outside salespersons fixed monthly salaries and commissions based on net sales. Sales commissions are computed and paid on a monthly basis (in the month following the month of sale) and the fixed salaries are treated as advances against commissions. However, if the fixed salaries for salespersons exceed their sales commissions earned for a month, such excess is not charged back to them. Pertinent data for the month of March 2020 for the three salespersons are as follows: Fixed salaries Net sales Commissions rate Marissa 100,000 900,000 10% Emma 150,000 2,500,000 10% Jocelyn 250,000 4,000,000 15% What should Duke Company accrue for sales commissions at March 31, 2020? 450,000 940,000 440,000 500,000arrow_forwardNeat Logos buys logo-imprinted merchandise and then sells it to university bookstores. Sales are expected to be $2,009,000 in September, $2,250,000 in October, $2,378,000 in November, and $2,560,000 in December. Neat Logos sets its prices to earn an average 30% gross profit on sales revenue. The company does not want inventory to fall below $440,000 plus 10% of the next month's cost of goods sold. Prepare a cost of goods sold, inventory, and purchases budget for the months of October and November.arrow_forwardGarcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2020, the balance in Garcia’s Raw Materials Inventory account was $408,000, and Allowance to Reduce Inventory to NRV had a credit balance of $27,500. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Garcia’s May 31, 2020, financial statements for inventory under the LCNRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Cost Sales Price Net RealizableValue Aluminum…arrow_forward
- NEBRASKA Co. has two merchandise outlets, its main store in Anchorage and its Fairbanks branch. For control purposes, all purchases are made by Anchorage main store and shipped to Fairbanks branch at cost plus 10%. On January 1, 2018, the inventories in Anchorage and Fairbanks are $1,360 and $396, respectively. During 2018, Anchorage purchased merchandise costing $4,000 and shipped 40% of it to the branch. At Year Ended 2018, the following journal entry to prepare the books for the next accounting period was prepared: Sales 3,200 Inventory 484 Inventory 396 Shipments from main store 1,760 Expenses 1,048 Main Store 480 What is the amount of overvaluation that was realized from the branch sales?arrow_forwardElitz and Van Aken, CPAs, offer three types of services to clients: auditing, tax, and small business accounting. Based on experience and projected growth, the following billable hours have been estimated for the year ending December 31, 2020: Service Billable Hours Audit Department: Staff 22,400 Partners 7,900 Tax Department: Staff 13,200 Partners 5,500 Small Business Accounting Department: Staff 3,000 Partners 600 The average billing rate for staff is $160 per hour, and the average billing rate for partners is $350 per hour. Prepare a professional fees earned budget for Elitz and Van Aken, CPAs, for the year ending December 31, 2020, using the following column headings and showing the estimated professional fees by type of service rendered and add additional rows in the table as needed:arrow_forwardAssume that you are the managerial accountant at Infostore, a manufacturer of hard drives, CDs, and DVDs. Its reporting year-end is December 31. The chief financial officer is concerned about having enough cash to pay the expected income tax bill because of poor cash flow management. On November 15, the purchasing department purchased excess inventory of CD raw materials in anticipation of rapid growth of this product beginning in January. To decrease the company’s tax liability, the chief financial officer tells you to record the purchase of this inventory as part of supplies and expense it in the current year; this would decrease the company’s tax liability by increasing expenses. Required 1. In which account should the purchase of CD raw materials be recorded? 2. How should you respond to this request by the chief financial officer?arrow_forward
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