Accounting Chapter 8 Homework This List Should Prepared That Can Later

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

Prepaid Insurance …………………………………

28,000

$ 3,200

Accounts Payable …………………………..…….

Sales Revenue ………………………………………

Sales Discounts ……………………………………

320

Cost of Goods Sold ……………………………….

10,000

Depreciation Expense …………………………...

200

Salaries and Wages Expense …………………

Insurance Expense ………………………………..

(g) FULLERTON COMPANY

Income Statement

For the Month Ending December 31, 2017

Sales revenue ……………………………………….

$16,000

Less: Sales discounts ………………………….

320

Net sales ………………………………………………

15,680

Cost of goods sold ………………………………..

Gross profit ………………………………………….

Operating expenses

Salaries and wages expense …………..

$2,200

Insurance expense …………………………

400

Depreciation expense ……………………..

200

2,800

Net income……………………………………………

$ 2,880

COMPREHENSIVE PROBLEM SOLUTION (Continued)

(g) FULLERTON COMPANY

Balance Sheet

December 31, 2017

Assets

Current assets

Cash ……………………………………………….

$27,620

Accounts receivable …………………………

Inventory …………………………………………

17,880

Prepaid insurance …………………………...

Total current assets ……………………..

Property, plant, and equipment

Equipment ……………………………………….

28,000

Total assets ……………………………………………

Less: Accumulated

Liabilities and Owner’s Equity

Current liabilities

Accounts payable …………………………….

$ 6,100

$73,380

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

(2)

$3,078 million increase

$1,972 million increase

(3)

$9,688 million

$10,542 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

(2)

$574 million increase

$500 million decrease

(3)

$5,475 million

$23,257 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.

The accounts receivable clerk is

Again, there is poor segregation of

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.

intact daily.

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.