978-0077633059 Chapter 6 Solution Manual Part 5

subject Type Homework Help
subject Pages 6
subject Words 1387
subject Authors John Wild, Ken Shaw

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Communicating in Practice BTN 6-4B
Memorandum
To: “Owner”
From: “Consultant”
Date: __________
Subject: Advice on monitoring purchase discounts
[Instructors Note: The response should acknowledge the owners concern and
recommend the net method of recording purchases. It should explain how this method
results in the recording of “Discounts Lost,” which will flow through to the income
statement, thus providing the information desired. The memo might look something like
the following.]
This practice gives management better control over persons responsible
for paying bills on time to take advantage of favorable discounts. This also
means it’s less likely that favorable discounts are lost.
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Taking It to the Net BTN 6-5
3. The median duration — the amount of time from when the fraud
4. Asset misappropriations are the most common fraud, occurring in 85% of
5. Only 9% of cases involved financial statement fraud, but those cases had
6. Over 40% of all cases were detected by a tip — more than twice the rate of
any other detection method.
7. Owners/executives only accounted for 19% of all cases, but they caused a
median loss of $500,000. Employees committed 42% of occupational
8. Approximately 77% of the frauds in our study were committed by
9. The vast majority of occupational fraudsters are first-time offenders; only
5% had been convicted of a fraud-related offense prior to committing the
Financial and Managerial Accounting, 6th Edition
418
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Teamwork in Action BTN 6-6
Common internal controls visible in a typical retail store include:
1. Door locks and roll-down screens for after-hours lock-up.
3. Security cameras.
5. Cash registers.
7. Bar coding on merchandise.
9. Dressing room attendants.
11. Timeclocks.
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Entrepreneurial Decision BTN 6-7
1. Seven principles of internal control along with examples are:
a. Establish responsibilities. The clerks at the counter should be
responsible for handling cash. The other employees should be
doors, etc.
b. Maintain adequate records. The clerks at the counter should enter
all sales on the cash registers. The cash registers should include a
c. Insure assets and bond key employees. The owner should acquire
insurance for the employees and the physical facilities. Insurance
d. Separate recordkeeping from custody of assets. The employee
who is responsible for food preparation and inventory should not
e. Divide responsibility for related transactions. The employee
responsible for ordering inventory should be separate from the
f. Apply technological controls. The owner should invest in
technological controls such as cash registers, time clocks,
g. Perform regular and independent reviews. The owner should
implement regular reviews of all operating and control procedures.
2. As the business grows, controls will become more important. The
owner will have more employees and will have to delegate more
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Hitting the Road BTN 6-8
No formal solution exists for this activity. It is usually interesting for the
class to exchange their discoveries via class discussion. This is
particularly the case with respect to popular college service/product
centers. Common controls found in college units include:
1. Door locks and roll-down screens for after-hours lock-up.
2. Electronic detection devices stationed at entrances or anti-theft devices
on merchandise that must be removed by a cashier.
Global Decision BTN 6-9
1.
(KRW millions)
Current
year
balance
Cash as
percent
of:
Prior
year
balance
Cash as
percent
of:
Cash (and equivalents)............
16,284,780 18,791,460
Total equity.............................
150,016,010 10.9 121,480,206 15.5
Analysis comment: Cash has decreased as a percent of current assets
and total assets compared to the prior year. Similarly, cash has
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Global Decision (Concluded)
2. Cash, beginning-year (KRW millions).........................................18,791,460
3. Days' Sales Uncollected Formula (KRW millions)
Days’ sales uncollected = x 365
Current Year: x 365 = 44.5 days
Accounts receivable
Net sales
27,875,934
228,692,667

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