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Vilka [71]
2 years ago
8

Island Trading Co., a client of your CPA firm, has requested your advice on the following problem. It has three clerical employe

es who must perform the following functions:
1. Maintain general ledger.
2. Maintain accounts payable ledger.
3. Maintain accounts receivable ledger.
4. Maintain cash disbursements journal and prepare checks for signature.
5. Issue credit memos on sales returns and allowances.
6. Reconcile the bank account.
7. Handle and deposit cash receipts.
Assuming that there is no problem as to the ability of any of the employees, the company requests your advice on assigning the above functions to the three employees in such a manner as to achieve the highest degree of internal control. It may be assumed that these employees will perform no other accounting functions than the ones listed and that any accounting functions not listed will be performed by persons other than these three employees.

a. List four possible unsatisfactory combinations of the above-listed functions.

b. State how you would recommend distributing the above functions among the three employees. Assume that, with the exception of the nominal jobs of the bank reconciliation and the issuance of credits on returns and allowances, all functions require an equal amount of time.
Business
1 answer:
Illusion [34]2 years ago
8 0

Answer:

Explanation:

A.

General ledger - cash receipts. With custody to cash, this person could steal cash receipts and conceal the theft by recording a fictitious entry in the General Ledger to credit (reduce) the balance of the cash account by the amount stolen.2.Accounts receivable ledger - cash receipts. With custody to cash, this person could steal cash receipts and conceal the theft by recording a fictitious entry in the Accounts Receivable Subsidiary Ledger to reduce a customer's accountsreceivable balance by the amount stolen.3.Bank reconciliation - cash receipts.With custodyto cash, this person couldsteal cash receipts and conceal the theft by falsifying (recording) the bankreconciliation.4.Credits on returns and allowances - cash receipts.This person couldauthorize (authorization) or record false credit memos (recording)to customerswho are making a payment and steal the customer payments (custody)

B.

Any distribution that avoids all of the above unsatisfactory combinations and spreads the workload evenly is acceptable. The key is not to have anyone with both custody and a recording function that could be used to conceal a theft. One such combination is: First employee accounts payable ledger, accounts receivable ledger, bank reconciliations Second employee general ledger, disbursements journal, credits on returns and allowances Third employee prepare checks for signature, cash receipts

1st employee - G/L, reconcile, sales return and allowance (control)

2nd employee: Cash receipts journal, cash disbursement (assets)

3rd employee - A/R and A/p ledger (books)

Which of the following would be least likely to be considered an objective of internal control?

(1) Checking the accuracy and reliability of accounting data.

(2) Detecting management fraud.

(3) Encouraging adherence to managerial policies. (4) Safeguarding assets.

2 - Detecting management fraud.

The number of personnel in an information systems department may limit the extent to which segregation of duties is feasible. What is the minimum amount of segregation of duties that will permit satisfactory internal control?

There needs to be a minimum of 3 personnel in an information systems department to feasibly segregate duties.

Programming, operating, techical services

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Question 3: Cost terminology in manufacturing firms a) Direct materials include all materials and components only raw materials
zaharov [31]

Answer:

1. a. Only major materials and components.

Only the major materials and components are include as direct materials because these are the materials that directly needed for production.

b. Only hourly production workers (aka assembly workers).

The direct labor has to be those people who are directly involved in production which in this case is the assembly workers. Managers and Supervisors are not integral so are not direct labor.

c. Both big items that cannot be traced (e.g., factory rent) and small items that are not worth tracing (e.g., glue, grease).

All other items involved in production should be included as manufacturing overheads including big items and small items that cannot be traced.

2.

Rent for the factory building ⇒ <u>Manufacturing Overhead (OH).</u>

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Depreciation on production equipment ⇒ <u>Manufacturing Overhead (OH). </u>

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7 0
2 years ago
Assume that you have recently purchased 100 shares in an investment company. Upon examining the balance sheet, you note that the
elena55 [62]

Answer: Net Asset Value = 1950

Explanation:

Assets = $225 million

Liabilities = $30 million

Shares outstanding = 10 million

We can compute the Net Asset Value, using the following formula:

<em>NAV\ per\ share= \frac{Assets - Liabilities }{Outstanding\ Shares}</em>

<em>NAV\ per\ share = \frac{225 - 30}{10}</em>

<em>NAV per share = 19.5</em>

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3 years ago
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Answer:

B. Credited Gain on fluctuation of foreign currency for $1,170

Explanation:

The journal entry to record the collection of foreign receivables is provided

Account Titles and Explanation                         Debit     Credit

Cash                                                                      40,170

(3,900,000 * 0.0103)

Foreign reserve                                                                  39,000

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Gain of fluctuation of foreign currency                              1,170

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Hence, the correct option is Credited Gain on fluctuation of foreign currency for $1,170

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