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COMPREHENSIVE PROBLEM SOLUTION (Continued)
(f) FULLERTON COMPANY
Adjusted Trial Balance
December 31, 2017
DR.
CR.
Cash .............................................................
$27,620
Accounts Receivable ..................................
1,880
Inventory ......................................................
17,880
Sales Discounts ..........................................
320
Cost of Goods Sold .....................................
10,000
Depreciation Expense .................................
200
(g) FULLERTON COMPANY
Income Statement
For the Month Ending December 31, 2017
Sales revenue ..............................................
$16,000
Less: Sales discounts ...............................
320
Net sales ......................................................
15,680
Operating expenses
Salaries and wages expense ..............
$2,200
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(g) FULLERTON COMPANY
Balance Sheet
December 31, 2017
Assets
Current assets
Cash .......................................................
$27,620
Property, plant, and equipment
Equipment ..............................................
28,000
Less: Accumulated
Liabilities and Owner’s Equity
Current liabilities
Accounts payable ..................................
$ 6,100
BYP 8-1 FINANCIAL REPORTING PROBLEM
(a) In the Report, it states that “the financial statements referred to above
[including the statement of cash flows] present fairly, in all material
respects, the financial position of Apple Inc. as of September 28, 2013
(b) Cash and cash equivalents are reported at $14,259 million for 2013 and
(c) Cash equivalents are defined as “all highly liquid investments with
maturities of three months or less at the date of purchase.”
(d) The Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act). Management
conducted an assessment of the effectiveness of the Company’s
BYP 8-2 COMPARATIVE ANALYSIS PROBLEM
PepsiCo
Coca-Cola
(a)
(1)
$9,375 million
$10,414 million
(b) Both companies generated over 8.9 billion dollars from operating
activities. This cash is used for investing and financing activities. Both
companies use the cash provided by operating activities to purchase
BYP 8-3 COMPARATIVE ANALYSIS PROBLEM
Amazon
Wal-Mart
(a)
(1)
$8,658 million
$7,281 million
(b) Both companies generated over 5.4 billion dollars from operating
activities. Wal-Mart generated an amazing 23 billion dollars from operating
BYP 8-4 REAL-WORLD FOCUS
(a) The system of internal control should be evaluated by: (1) responsible
individuals from a particular university unit, (2) internal auditors, and
(3) university management.
BYP 8-5 DECISION MAKING ACROSS THE ORGANIZATION
(a) The weaknesses in internal accounting control over collections are:
(1) Each usher could take cash from the collection plates enroute to the
basement office.
(2) The head usher counts the cash alone.
(b) The improvements should include the following:
(1) The ushers should transfer their cash collections to a cash pouch
(or bag) held by the head usher. The transfer should be witnessed
by a member of the finance committee.
(c) The policies that should be changed are:
(1) Members should make checks payable to the church.
(2) A petty cash fund should be established for the financial secretary to
BYP 8-6 COMMUNICATION ACTIVITY
Mr. Danny Peak
Pritchard Company
Main Street, USA
Dear Mr. Peak:
During our audit of your financial statements, we reviewed the internal con-
trols over cash receipts. The weaknesses we discovered and our suggested
improvements are listed below.
Weaknesses
Suggested Improvement
1.
A list of checks received is not
prepared by the person who opens
the mail.
This list should be prepared so that it
can later be compared with the daily
cash summary. While this procedure
does not assure that all checks will
3.
The cashier is allowed to open
the mail.
Under this arrangement, it is possible
for the cashier to open the mail, pre-
pare the cash summary and make the
BYP 8-6 (Continued)
Weaknesses
Suggested Improvement
5.
Mail receipts are deposited weekly.
This makes the receipts vulnerable
BYP 8-7 ETHICS CASE
(a) You, as assistant controller, may suffer some negative effects from Lisa
Infante, the financial vice-president, if you don’t follow her instructions.
Maybe the insurance company will react the way Lisa suggests, but
probably not.
(b) Holding the cash receipts book open in order to overstate the cash
balance is a fraudulent, deceitful, unethical action. The financial vice-
president should not encourage such behavior and a controller should
not follow such instructions.
BYP 8-8 ALL ABOUT YOU
Answers are provided to students on the government website as they
complete the ID Theft Faceoff quiz.
BYP 8-9 FASB CODIFICATION ACTIVITY
(a) Consistent with common usage, cash includes not only currency on
hand but demand deposits with banks or other financial institutions.
Cash also includes other kinds of accounts that have the general
characteristics of demand deposits in that the customer may deposit
(b) Cash equivalents are short-term, highly liquid investments that have
both of the following characteristics:
a. Readily convertible to known amounts of cash
b. So near their maturity that they present insignificant risk of changes
in value because of changes in interest rates.
Generally, only investments with original maturities of three months or
BYP 8-9 (Continued)
(c) Cash and cash items. Separate disclosure shall be made of the cash and
cash items which are restricted as to withdrawal or usage. The provi-
sions of any restrictions shall be described in a note to the financial
statements. Restrictions may include legally restricted deposits held
as compensating balances against short-term borrowing arrangements,
contracts entered into with others, or company statements of intention
IFRS EXERCISES
IFRS8-1
Companies listed on U.S. stock exchanges must comply with the Sarbanes-
Oxley Act. This compliance gives investors greater assurance that these
companies have adequate internal controls in place. In addition, the
auditors for these publicly traded companies must attest to the effectiveness
of such controls. This process can result in discovery of weaknesses that
companies had previously overlooked. After correcting these weaknesses
IFRS8-3 INTERNATIONAL FINANCIAL REPORTING PROBLEM
Note in 1.17 in Louis Vuitton’s annual report states cash and cash
equivalents comprise cash on hand and highly liquid monetary
investments subject to an insignificant risk of changes in value over time.
