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Holmes Corporation manufactures electronic components for use in many consumer
products. Their raw materials are purchased literally from all over the world. Depending
on the country involved, purchase terms vary widely. Some suppliers, for example,
require full prepayment, while others are content to receive payment within six months
of receipt of the goods.
Because of this situation, Holmes never closes its books until at least ten days after
month end. In this way, it can sort out ownership of goods in transit, and document
which goods were received by month end, and which were not.
Manya Andre, a new accountant, was asked to record about $70,000 in inventory as
having been received before month end. She argued that the shipping documents clearly
showed that the goods were actually received on the 8th of the current month. Her boss,
busy with month-end reports, curtly tells Ann to check the shipping terms. She did so,
and found the notation "FOB shipper's dock" on the document. She hadn't seen that
particular notation before, but she reasoned that if the selling company considered it
shipped when it reached their dock, Holmes should consider it received when it reached
Holmes's dock. She did not record the purchase until after month end.
Answer:
Recording depreciation on plant assets affects the balance sheet and the income
statement.
Answer:
When the periodic payments are not equal in each period, the future value can be
computed by using a future value of an annuity table.
Answer:
Under IFRS and under GAAP, current assets are listed in
Answer:
Joe Foss has worked for Dr. Sam Milton for several years. Joe demonstrates a loyalty
that is rare among employees. He hasn't taken a vacation in the last three years. One of
Joe's primary duties at the medical office is to open the mail and list the checks
received. He also takes cash from patients at the cashier window as patients leave. At
times it is so hectic that Joe doesn't bother with giving each patient a receipt for the cash
paid on their accounts. He assures them he will see to it that they receive the proper
credit. When the traffic is slow in the office, Joe offers to help Ann post the payments to
the patients' accounts receivable. She is always happy to receive his help, because he is
a very conscientious worker.
Instructions
Identify any principles of internal control that may be violated in this medical office
situation.
Answer:
