ACCT 217 Lecture Notes - Lecture 11: Fifo (Computing And Electronics), Perpetual Inventory, Consignor

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coralfrog569

3 Jul 2015

School

University of Calgary

Department

Accounting

Course

ACCT 217

Professor

Darrin Ambrose

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Document Summary

Whether companies use a periodic or perpetual system, physical inventory must still be counted at the end of the period: To check the accuracy of the perpetual inventory records. To determine the amount of inventory lost to shrink or theft. To ensure financial statements are a true and fair representation of inventory values. To ensure inventory is properly counted, companies must have a good system of internal control: Employees who perform the count should not have responsibility for custody or record- keeping (segregation of duties) Need to consider ownership of goods when taking inventory. Goods in transit at the end of the period make the determination of ownership more complicated: Determine who has legal title to goods in transit. Include in inventory if company has legal title. Ownership of consigned goods remains with the owner (the consignor), not the holder of the goods (the consignee)

Related Questions

Answers to the 30multiple choice questions					2 points each, 30questions, for 60 point total
			60 points
	< please record	1)	From an internal control standpoint, the asset mostsusceptible to improper diversion and use is
	answer here	a.	prepaid insurance.
		b.	cash.
		c.	Equipment
		d.	Investments

		2)	Jolene is warehouse custodian and alsomaintains the accounting record of the inventory held at thewarehouse. An assessment of this situation indicates
		a.	documentation procedures are violated.
		b.	independent internal verification is violated.
		c.	segregation of duties is violated.
	< please record	d.	establishment of responsibility is violated.
	answer here
		3)	Internal control is defined, in part, as a planthat safeguards
		a.	all balance sheet accounts.
		b.	assets.
		c.	liabilities.
		d.	capital stock.

		4)	The control principle related to nothaving the same person authorize and pay for goods is known as
		a.	establishment of responsibility.
		b.	independent internal verification.
	< please record	c.	segregation of duties.
	answer here	d.	rotation of duties.

		5)	Two individuals at a retail store work thesame cash register. You evaluate this situation as
		a.	a violation of establishment of responsibility.
		b.	a violation of segregation of duties.
		c.	supporting the establishment of responsibility.
	< please record	d.	supporting internal independent verification.
	answer here
		6)	Having different individuals receive cash,record cash receipts, and hold the cash is an example of
		a.	establishment of responsibility.
		b.	segregation of duties.
		c.	documentation procedures.
		d.	independent internal verification.

		7)	An adjusting entry is not required for
		a.	outstanding checks.
		b.	collection of a note by the bank.
		c.	NSF checks.
		d.	bank service charges.

		8)	If a check correctly written and paid bythe bank for $591 is incorrectly recorded on the company's booksfor $519,
		the appropriate treatment on the bankreconciliation would be to
		a.	deduct $72 from the book's balance.
		b.	add $72 to the book's balance.
		c.	deduct $72 from the bank's balance.
		d.	deduct $591 from the book's balance.

		9)	During 2013, Parker Enterprises generatedrevenues of $60,000. The company's expenses were as follows:
			cost of goods sold of $30,000, operatingexpenses of $12,000 and a loss on the sale of equipment of$2,000.
		Parker's gross profit is:
		a.	$16,000.00
		b.	$18,000.00
		c.	$30,000.00
		d.	$60,000.00

		10)	A primary difference between a periodicand perpetual inventory system is that a periodic system:
		a.	determines the inventory on hand only at the end ofthe accounting period.
		b.	provides better control over inventories.
		c.	records the cost of goods sold after each saletransaction.
		d.	keeps a record showing the merchandise inventory onhand at all times.

		11)	A decline in a company's gross profitcould be caused by all of the following except:
		a.	selling products using a lower markup.
		b.	clearance of discontinued inventory.
		c.	paying lower prices to its suppliers.
		d.	increasing competition resulting in a lower sellingprice.

		12)	South Company uses the perpetual inventorysystem. South's goods in transit at December 31 include:
			Sales made by South	Purchases made by South
			(1) FOB destination	(3) FOB destination
			(2) FOB shipping point	(4) FOB shipping point
			Which itemsshould be included in South's inventory at December 31?
			a. (2) and (3)
			b. (1) and (4)
			c. (1) and (3)
			d. (2) and (4)

		13)	In periods of rising prices, the inventorymethod which results in the greatest net income is the:
		a.	LIFO method.
		b.	FIFO method.
		c.	Weighted Average method.
		d.	Lower of Cost or Market method.

		14)	The following information was available for RawleyCompany at December 31, 2008:
			inventory (Jan .01) $80,000; inventory (Dec. 31)$120,000; cost of goods sold $600,000;
			accounts receivable $73,000; and sales$900,000.
			Rawley's inventory turnover in 2008 was:
		a.	9.00 times.
		b.	7.50 times.
		c.	6.00 times.
		d.	5.00 times.

		15)	A petty cash fund of $200 is replenishedwhen the fund contains $5 in cash and receipts for $193.
		The entry to replenish the fund would:
		a.	credit Cash Over and Short for $2.
		b.	credit Miscellaneous Revenue for $2.
		c.	debit Cash Over and Short for $2.
		d.	debit Miscellaneous Expense for $2.

		16)	An item is considered material if
		a.	it doesn't costs a lot of money.
		b.	it is of a tangible good intended for re-sale.
		c.	it is likely to influence the decision of aninvestor or creditor.
		d.	the cost of reporting the item is greater than itsbenefits.

		17)	Receivables might be sold to
			a. lengthen the cash-to-cash operating cycle.
			b take advantage of deep discounts on the cashrealizable value of receivables.
			c. generate cash quickly.
			d. finance companies at an amount greater than cashrealizable value.

		18)	If the amount of uncollectible accountexpense is understated at year end:
		a.	net income will be understated.
		b.	stockholders' equity will be understated.
		c.	allowance for doubtful accounts will be overstated.
		d.	net accounts receivable will be overstated.

		19)	A debit balance in the Allowance for DoubtfulAccounts
		a.	is the normal balance for that account.
		b.	indicates that actual bad debt write-offs haveexceeded previous provisions for bad debts.
		c.	indicates that actual bad debt write-offs have beenless than what was estimated.
		d.	cannot occur if the percentage of sales method ofestimating bad debts is used.

		20)	Bad Debts Expense is considered
		a.	an avoidable cost in doing business on a credit basis.
		b.	an internal control weakness.
		c.	a necessary risk of doing business on a credit basis.
		d.	avoidable unless there is a recession.

		21)	The best managed companies will have
		a.	no uncollectible accounts.
		b.	a very strict credit policy.
		c.	a very lenient credit policy.
		d.	some accounts that will prove to be uncollectible.

		22)	Two methods of accounting for uncollectibleaccounts are the
		a.	allowance method and the accrual method.
		b.	allowance method and the net realizable method.
		c.	direct write-off method and the accrual method.
		d.	direct write-off method and the allowance method.

		23)	When the allowance method of accountingfor uncollectible accounts is used, Bad Debts Expense isrecorded
		a.	in the year after the credit sale is made.
		b.	in the same year as the credit sale.
		c.	as each credit sale is made.
		d.	when an account is written off as uncollectible.

		24)	Allowance for Doubtful Accounts on the balancesheet
		a.	is offset against total current assets.
		b.	increases the cash realizable value of accountsreceivable.
		c.	appears under the heading "Other Assets."
		d.	is offset against accounts receivable.

		25)	In reviewing the accounts receivable, thecash realizable value is $14,000 before the write-off of a $1,500account.
		What is the cash realizable value after thewrite-off?
		a.	$1,500
		b.	$12,500
		c.	$14,000
		d.	$15,500

		26)	The maturity value of a $60,000, 10%, 60-day notereceivable dated July 3 is
		a.	$60,000
		b.	$61,000
		c.	$66,000
		d.	$70,000

		27)	The interest on a $10,000, 10%, 1-year notereceivable is
		a.	$1,000
		b.	$10,000
		c.	$10,100
		d.	$11,000

		28)	The maturity value of a $60,000, 8%, 3-month notereceivable is
		a.	$60,400
		b.	$60,480
		c.	$61,200
		d.	$64,800

		29)	Notes receivable are recorded in the accounts at
		a.	cash (net) realizable value.
		b.	face value.
		c.	gross realizable value.
		d.	maturity value.

		30)	Which of the following are also called tradereceivables?
		a.	Accounts receivable
		b.	Other receivables
		c.	Advances to employees
		d.	Income taxes refundable

indigocoyote311

Solve the following QS and Exercises from your textbook in chapter 8.

QS 8-1

Internal control objectives

An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.

____	1.	Separation of recordkeeping for assets from the custody over assets is intended to reduce theft and fraud.
____	2.	The primary objective of internal control procedures is to safeguard the business against theft from government agencies.
____	3.	The main objective of internal control procedures is best accomplished by designing an operational system with managerial policies that protect the assets from waste, fraud, and theft.
____	4.	Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to herself or himself.

QS 8-2

Cash and equivalents

Choose from the following list of terms/phrases to best complete the following statements.

a.	Cash
b.	Cash equivalents
c.	Outstanding check
d.	Liquidity
e.	Bank reconciliation
f.	Current assets

____	1.	The category includes currency and coins along with amounts on deposit in bank accounts, checking accounts, and savings accounts.
____	2.	The term __________ refers to a companyâs ability to pay for its near-term obligations
____	3.	The __________ category includes short-term highly liquid investment assets that are readily convertible to a known cash amount and sufficiently close to their due dates so that their market value is not sensitive to interest rate changes.

QS 8-3

Internal control for cash

A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection.

____	a.	A basic guideline for safeguarding cash is that all cash receipts be deposited weekly or monthly.
____	b.	A voucher system of control is a control system exclusively for cash receipts.
____	c.	A basic guideline for safeguarding cash is to separate the duties of those who have custody of cash from those who keep cash records.
____	d.	A petty cash system is not a control procedure for safeguarding cash.

QS 8-4

Petty cash accounting

The petty cash fund of the Brooks Agency is established at $150. At the end of the current period, the fund contained $28 and had the following receipts: film rentals, $24; refreshments for meetings, $46 (both expenditures to be classified as Entertainment Expense); postage, $30; and printing, $22. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.

Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry.

____	a.	Fund amount is being reduced
____	b.	Fund amount is being increased
____	c.	Fund is being eliminated
____	d.	Fund is being established

Exercise 8-13^A

Documents in a voucher system

Match each document in a voucher system in column one with its description in column two.

Document

1.	Purchase requisition
2.	Purchase order
3.	Invoice
4.	Receiving report
5.	Invoice approval
6.	Voucher

Description

____	A.	An itemized statement of goods prepared by the vendor listing the customerâs name, items sold, sales prices, and terms of sale.
____	B.	An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
____	B.	An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
____	C.	A document used to place an order with a vendor that authorizes the vendor to ship ordered merchandise at the stated price and terms.
____	D.	A checklist of steps necessary for the approval of an invoice for recording and payment; also known as a check authorization.
____	E.	A document used by department managers to inform the purchasing department to place an order with a vendor.
____	F.	A document used to notify the appropriate persons that ordered goods have arrived, including a description of the quantities and condition of goods.

Exercise 8-14^B

Record invoices at gross or net amounts

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts and (b) at net amounts.

Oct.	2	Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/30.
	10	Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2.
	17	Purchased merchandise at a $5,400 price, invoice dated October 17, terms 2/10, n/30.
	27	Paid for the merchandise purchased on October 17, less the discount.
		31Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost. Please provide all the answer thank you

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ACCT 217 Lecture Notes - Lecture 11: Fifo (Computing And Electronics), Perpetual Inventory, Consignor

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