西方财务会计课后题5-8答案.doc

1 CHAPTER 5 1.THE KNOWLEDGE THAT JOB ROTATION IS PRACTICED AND THAT ONE EMPLOYEE MAY PERFORM ANOTHERS JOB AT A LATER DATE TENDS TO DISCOURAGE DEVIATIONS FROM PRESCRIBED PROCEDURES. ALSO, ROTATION HELPS TO DISCLOSE ANY IRREGU LARITIES THAT MAY OCCUR. 2.Authorizing complete control over a sequence of related operations by one individual presents opportunities for inefficiency, errors, and fraud. The control over a sequence of operations should be divided so that the work of each employee is automatically checked by another employee in the normal course of work. A system functioning in this manner helps prevent errors and inefficiency. Fraud is unlikely without collusion between two or more employees. 3.To reduce the possibility of errors and embezzlement, the functions of operations and accounting should be separated. Thus, one employee should not be responsible for handling cash receipts (operations) and maintaining the accounts receivable records (accounting). 4.No. Combining the responsibility for related operations, such as combining the functions of purchasing, receiving, and storing of supplies, increases the possibility of errors and fraud. 5.The control procedure requiring that responsibility for a sequence of related operations be divided among different persons is violated in this situation. This weakness in the internal control may permit irregularities. For example, the ticket seller, while acting as ticket taker, could admit friends without a ticket. 6.The responsibility for maintaining the accounting records should be separated from the responsibility for operations so that the accounting records can serve as an independent check on operations. 7.The individual accounts receivable ledger accounts provide business managers information on the status of individual customer accounts, which is necessary for managing collections. Managers need to know which customers owe money, how much they owe, and how long the amount owed has been outstanding. 8.The major advantages of the use of special journals are substantial savings in record-keeping expenses and a reduction of record-keeping errors. 9.a.250；b.None 10.a.250；b.1 11.a.Sometime following the end of the current month, one of two things may happen: (1) an overdue notice will be received from Hoffman Co., and/or (2) a letter will be received from Hoffer Co., informing the buyer of the overpayment. (It is also possible that the error will be discovered at the time of making payment if the original invoice is inspected at the time the check is being written.) b.The schedule of accounts payable would not agree with the balance of the accounts payable account. The error might also be discovered at the time the invoice is paid. c.The creditor will call the attention of the debtor to the unpaid balance of $1,000. d.The error will become evident during the verification process at the end of the month. The total debits in the purchases journal will be less than the total credits by $2,000. 12.a.No, the error will not cause the trial balance totals to be unequal. b.No, the sum of the balances in the creditors ledger will not agree with the balance of the accounts payable account in the general ledger. 13.a.Cash payments journal；b.Purchases journal；c.Cash payments journal d.Purchases journal；e.Cash payments journal 14.An electronic form is a software window that provides the inputs for a particular transaction. For example, a check form provides the inputs (payee, amount, date) for a cash payment transaction. An electronic invoice provides the inputs (customer, amount sold, item sold) for recording revenues earned on account. 15.The use of controlling accounts to verify the accuracy of subsidiary accounts is used in a manual system. In a computerized system, it is assumed that the computer will accurately sum the individual transactions in the subsidiary accounts in determining the aggregate balance. Thus, there is no need for controlling accounts for controlling the accuracy of the individual postings. 16.For automated systems that use electronic forms the special journals are not used to record original transactions. Rather, elec-tronic forms capture the original transaction detail from an invoice, for example, and automatically post the transaction details to the appropriate ledger accounts. 2 17.E-commerce can be used by a business to conduct transactions directly with customers. Thus, an order can be received directly from the customers Internet input and cash can be received from the credit card. Many times, the cash is received prior to actually shipping the product, resulting in a faster revenue/collection cycle. Reducing paperwork throughout the cycle also improves the efficiency of the process. For example, all of the accounting transactions can be fed automatically from the initial Web- based inputs. EX. 51 As an internal auditor, you would probably disagree with the change in policy. First Charter has some normal business risk associated with default on bank loans. One way to help minimize this is to carefully evaluate loan applications. Large loans present greater risk in the event of default than do smaller loans. Thus, it is reasonable to have more than one person involved in making the decision to grant a large loan. In addition, loans should be granted on their merits, not on the basis of favoritism or mere association with the bank president. Allowing the bank president to have sole authority to grant large loans can lead to the president granting loans to friends and business associates, without the required due diligence. This can result in a bank becoming exposed to very poor credit risks. Indeed, this scenario is one of the causes of savings and loan and bank failures of the past. Ex. 52 This is an example of a fraud with significant collusion. Frauds that are perpetrated with multiple parties in different positions of control make detecting fraud more difficult. In this case, the fraud began with an employee responsible for authorizing claim payments. This is a sensitive position because his decisions would initiate payments. However, claims would need to be authorized and verified before payment would be made. Knowing this, the employee made sure each claim had a phony “victim.” Thus, there was a verifiable story behind each claim. Only by tracking physical evidence of the accident could it be discovered that the claim was fictitious. However, the very nature of the process was to resolve small claims quickly without excessive control. Lastly, corrupt lawyers were brought into the fraud to act as attorneys for the claimants. This gave the claims even more credibility. In actuality, the lawyers had done legitimate business with the trucking company, so all appeared normal. This fraud was discovered when the fraudulent employees bank noticed irregularities in his bank account and notified authorities. As the saying goes, “Follow the money!” As a side note, the corrupt claims administrator fell into this behavior due to gambling problems. Ex. 53 Event Sound should not have relied on the unusual nature of the vendors and delivery frequency to uncover this fraud. The purchase and payment cycle is one of the most critical business cycles to control, because the potential for abuse is so great. Purchases should be initiated by a requisition document. This document should be countersigned by a superior so that two people agree as to what is being purchased. The requisition should initiate a purchase order to a vendor for goods or services. The vendor responds to the purchase order by delivering the goods. The goods should be formally received using a receiving document. An accounts payable clerk matches the requisition, purchase order, and invoice before any payment is made. Such “triple matching” prevents unauthorized requests and payments. In this case, the requests were unauthorized, suggesting that the employee had sole authority to make a request. Second, this employee had access to the invoices. This access allowed the employee to change critical characteristics of the invoice to hide the true nature of the goods being received. The invoice should have been delivered directly to the accounts payable clerk to avoid corrupting the document. There apparently was no receiving document (common for smaller companies); thus, only the invoice provided proof of what was received and to be paid. If there had been a receiving report, the invoice could not have been doctored and gone undetected, because it would not have matched the receiving report. Note to Instructors: This exercise is based on an actual fraud. Ex. 54 a.The most difficult frauds to detect are those that involve the senior management of a company that is in a conspiracy to commit the fraud. The senior managers have the power to access many parts of the accounting system, while the normal separation of duties is subverted by involving many people in the fraud. In addition, the authorization control is subverted because most of the authorization power resides in the senior management. b.Overall, this type of fraud can be stopped if there is strong oversight of senior management, such as an audit committee of the board of directors. Individual “whistle blowers” in the company can make their concerns known to the independent or internal auditors who, in turn, can inform the audit 3 committee. The audit committee should be independent of management and have the power to monitor the actions of management. Ex. 55 1.General ledger accounts: (e)；2.Subsidiary ledger accounts: (a), (b), (c), (d) Ex. 56 a.Cash receipts journal；b.Cash receipts journal；c.General journal (not a revenue transaction) d.General journal；e. Cash receipts journal；f.Cash receipts journal g.Cash receipts journal；h.Revenue journal；i.Cash receipts journal；j.General journal Ex. 57 a.Cash payments journal；b. Purchases journal；c.Cash payments journal；d. General journal e.General journal；f. Cash payments journal；g.Purchases journal；h.Cash payments journal i.General journal；j. General journal；k.Purchases journal Ex. 58 Nov.3Provided service on account; posted from revenue journal. 9Granted allowance or corrected error related to sale of November 3; posted from general journal. 13Received cash for balance due; posted from cash receipts journal. Ex. 59 REVENUE JOURNALPAGE 8 InvoicePost.Accounts Rec. Dr. DateNo.Account DebitedRef.Fees Earned Cr. 2006 1Mar.2512Conrad Co. 7901 28513Orlando Co. 3102 312514Drake Inc. .5803 422515Electronic Central, Inc. .2504 31Total.1,9305 CASH RECEIPTS JOURNALPAGE 12 FeesAccts. Post.EarnedRec.Cash DateAccount CreditedRef.Cr.Cr.Dr. 2006 1Mar.4CMI, Inc. .2402401 219Drake Inc. .5305302 327Fees Earned70.703 429Conrad Co. .7907904 531Fees Earned40.405 631Total.1101,5601,6706 Ex. 510 1.General ledger account: (c), (e), (h), (j), (k), (l) 2.Subsidiary ledger account: (a), (b), (d), (f), (g), (i)；3.No posting required: (m) Ex. 511 1.General ledger account: (b), (c), (d), (f), (g), (i), (k), (l) 2.Subsidiary ledger account: (a), (e), (h)；3.No posting required: (j) Ex. 512 Feb.6Purchased services, supplies, equipment, or other commodities on account; posted from purchases journal. 10Received allowance or corrected error related to purchase of February 6; posted from general journal. 16Paid balance owed; posted from cash payments journal. Ex. 514 4 Revenue journal: (d), (i)；Cash receipts journal: (a), (e) Purchases journal: (g), (h)；Cash payments journal: (b), (f)；General journal: (c), (j) Ex. 515 1.The Cash column is for debits (not credits). 2.The Other Accounts column is for credits (not debits). 3.A better order of columns would be to place the Other Accounts Cr. column to the left of the Fees Earned Cr. column. A recommended and corrected cash receipts journal is as follows: CASH RECEIPTS JOURNALPAGE 12 DATE ACCOUN T CREDITE D POST. REF. OTHER ACCOUNT S CR. FEES EARNE D CR. ACCOUNT S REC. CR. CASH DR. 5 Ex. 513 PURCHASES JOURNALPAGE 36 OTHER ACCOUNTS DR. DAT E ACCOUNT CREDITEDPOS T REF. ACCOUNT S PAYABLE CR. CLEANIN G SUPPLIE S DR. ACCOUNTPOS T REF. AMOU NT 2007 1May3Industrial Products, Inc.85851 212Carver Paper Products, Inc.2052052 317Liquid Klean Supplies1701703 420Fountain Laundry Service70Laundry Service Exp.53704 531Total530460705 CASH PAYMENTS JOURNALPAGE 41 OtherAccounts CheckPost.AccountsPayableCash DateNo.Account DebitedRef.Dr.Dr.Cr. 2007 1 May157Liquid Klean Supplies.145145 1 2858Equipment.18450.450 2 41559Fountain Laundry Service .115115 4 52560Industrial Products, Inc.8585 5 63161Salary Expense .512,900.2,900 6 731Total3,3503453,695 7 6 Ex. 516 a. REVENUE JOURNALPAGE 1 DAT E INVOIC E NO. ACCOUNT DEBITED POST. REF. ACCTS. REC. DR. FEES EARNE D CR. SALES TAX PAYABLE CR. 1June161A. Sommerfeld315300151 2192K. Lee12612062 3213J. Koss848043 4224D. Jeffries12612064 5265J. Koss273260135 6286K. Lee636036 730987940477 8(12)(41)(22)8 JOURNALPAGE 1 Post. DateDescriptionRef.DebitCredit 2006 June24Office Supplies.14168 Fees Earned.41160 Sales Tax Payable.228 ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER D. Jeffries Post. DateItemRef.Dr.Cr.Balance 2006 June22R1126.126 J. Koss 2006 June21R184.84 26R1273.357 K. Lee 2006 June19R1126.126 28R163.189 A. Sommerfeld 2006 June16R1315.315 7 b. GENERAL LEDGER Accounts Receivable12 Post.Balance DateItemRef.Dr.Cr.Dr.Cr. 2006 June30R1987.987 Office Supplies14 2006 June24J1168.168 Sales Tax Payable22 2006 June24J1.8.8 30R1.47.55 Fees Earned41 2006 June24J1.160.160 30R1.9401,100 c.1.$987 ($126 + $357 + $189 + $315)2.$987 CHAPTER 6 1.Merchandising businesses acquire merchandise for resale to customers. It is the selling of merchandise, instead of a service, that makes the activities of a merchandising business different from the activities of a service business. 2.Yes. Gross profit is the excess of (net) sales over cost of merchandise sold. A net loss arises when operating expenses exceed gross profit. Therefore, a business can earn a gross profit but incur operating expenses in excess of this gross profit and end up with a net loss. 3.a.Increasec.Decrease；b.Increase d.Decrease 4.Under the periodic method, the inventory records do not show the amount available for sale or the amount sold during the period. In contrast, under the perpetual method of accounting for merchandise inventory, each purchase and sale of merchandise is recorded in the inventory and the cost of merchandise sold accounts. As a result, the amount of merchandise available for sale and the amount sold are continuously (perpetually) disclosed in the inventory records. 5.The multiple-step form of income statement contains conventional groupings for revenues and expenses, with intermediate balances, before concluding with the net income balance. In the single-step form, the total of all expenses is deducted from the total of all revenues, without intermediate balances. 6.The major advantages of the single-step form of income statement are its simplicity and its emphasis on total revenues and total expenses as the determinants of net income. The major objection to the form is that such relationships as gross profit to sales and income from operations to sales are 8 not as readily determinable as when the multiple-step form is used. 7.Revenues from sources other than the principal activity of the business are classified as other income. 8.Sales to customers who use bank credit cards are generally treated as cash sales. The credit card invoices representing these sales are deposited by the seller directly into the bank, along with the currency and checks received from customers. Sales made by the use of nonbank credit cards generally must be reported periodically to the card company before cash is received. Therefore, such sales create a receivable with the card company. In both cases, any service or collection fees charged by the bank or card company are debited to expense accounts. 9.The date of sale as shown by the date of the invoice or bill. 10.a.2% discount allowed if paid within ten days of date of invoice; entire amount of invoice due within 60 days of date of invoice. b.Payment due within 30 days of date of invoice. c.Payment due by the end of the month in which the sale was made. 11.a.A credit memorandum issued by the seller of merchandise indicates the amount for which the buyers account is to be credited (credit to Accounts Receivable) and the reason for the sales return or allowance. b.A debit memorandum issued by the buyer of merchandise indicates the amount for which the sellers account is to be debited (debit to Accounts Payable) and the reason for the purchases return or allowance. 12.a.The buyer；b.The seller 13.Examples of such accounts include the following: Sales, Sales Discounts, Sales Returns and Allowances, Cost of Merchandise Sold, Merchandise Inventory. 14.Cost of Merchandise Sold would be debited; Merchandise Inventory would be credited. EXERCISES Ex. 61 a.$490,000 ($250,000 + $975,000 $735,000)；b.40% ($490,000 $1,225,000) c.No. If operating expenses are less than gross profit, there will be a net income. On the other hand, if operating expenses exceed gross profit, there will be a net loss. Ex. 62 $15,710 million ($20,946 million $5,236 million) Ex. 63 a.Purchases discounts, purchases returns and allowances b.Transportation in；c.Merchandise available for sale；d.Merchandise inventory (ending) Ex. 64 1.The schedule should begin with the January 1, not the December 31, merchandise inventory. 2.Purchases returns and allowances and purchases discounts should be deducted from (not added to) purchases. 9 3.The result of subtracting purchases returns and allowances and purchases discounts from purchases should be labeled “net purchases.” 4.Transportation in should be added to net purchases to yield cost of merchandise purchased. 5.The merchandise inventory at December 31 should be deducted from merchandise available for sale to yield cost of merchandise sold. A correct cost of merchandise