ACC 305 Week 3 Quiz Assignments
Communication Case 6-3 on page 334
Harvey Alexander, an all-league professional
football player, has just declared free agency. Two teams, the San Francisco 49ers and the Dallas Cowboys,
have made Harvey the following offers to obtain his services:
49ers: $1 million signing bonus payable immediately and an
annual salary of $1.5
million for the five- year term of the contract.
Cowboys: $2.5 million signing bonus payable immediately and an annual salary of $1
million for the five-year term of the contract.
With both contracts, the annual salary will be paid
in one lump sum at the end of the football season.
Required:
You have been hired as a consultant to Harvey’s agent, Phil Marks, to evaluate the two contracts. Write a short letter to Phil with your recommendation including the method you used to reach your conclusion. Assume that Harvey has no preference between the two teams and that the decision will be based entirely on monetary considerations. Also assume that Harvey can invest his money and earn an 8% annual return.
Judgment Case 7-5 on page 391
Required:
You have been hired as a consultant to Harvey’s agent, Phil Marks, to evaluate the two contracts. Write a short letter to Phil with your recommendation including the method you used to reach your conclusion. Assume that Harvey has no preference between the two teams and that the decision will be based entirely on monetary considerations. Also assume that Harvey can invest his money and earn an 8% annual return.
Judgment Case 7-5 on page 391
For each
of the following independent situations, indicate the apparent internal control
weaknesses and suggest
alternative procedures to eliminate the weaknesses.
1. John Smith is the petty cash custodian. John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, John submits a list of all accounts and amounts to be charged and a check is written to him for the total amount. John is the only person ever to tally the fund.
2. All of the company’s cash disbursements are made by check. Each check must be supported by an approved voucher, which is in turn supported by the appropriate invoice and, for purchases, a receiving document. The vouchers are approved by Dean Leiser, the chief accountant, after reviewing the supporting documentation. Betty Hanson prepares the checks for Leiser’s signature. Leiser also maintains the company’s check register (the cash disbursements journal) and reconciles the bank account at the end of each month.
3. Fran Jones opens the company’s mail and makes a listing of all checks and
cash received from customers. A copy of the list is sent to Jerry McDonald who
maintains the general ledger accounts. Fran prepares and makes the daily
deposit at the bank. Fran also maintains the subsidiary ledger for accounts
receivable, which is used to generate monthly statements to customers.
P 7-10 (Page 388) - Evergreen Company
P 7-10 Miscellaneous
receivable transactions. Evergreen Company sells lawn and garden products to
wholesalers. The company's fiscal year-end is
P 7-10 Evergreen
Company
Evergreen
Company sells lawn and garden products to wholesalers. The company's fiscal
year-end is December 31. During 2011, the following transactions related to
receivables occurred:
Feb.
28 Sold merchandise to Lennox, Inc. for $10,000 and accepted a 10%, 7-month
note. 10% is an appropriate rate for this type of note.
Mar.
31 Sold merchandise to Maddox Co. and accepted a noninterest-bearing note with
a discount rate of 10%. The $8,000 payment is due on March 31, 2012.
Apr.
3 Sold merchandise to Carr Co. for $7,000 with terms 2/10, n/30. Evergreen uses
the gross method to account for cash discounts.
11
Collected the entire amount due from Carr Co.
17
A customer returned merchandise costing $3,200. Evergreen reduced the
customer's receivable balance by $5,000, the sales price of the merchandise.
Sales returns are recorded by the company as they occur.
30
Transferred receivables of $50,000 to a factor without recourse. The factor
charged Evergreen a 1% finance charge on the receivables transferred. The sale
criteria are met.
June
30 Discounted the Lennox, Inc., note at the bank. The bank's discount rate is
12%. The note was discounted without recourse.
Aug.
31 Lennox, Inc., paid the note amount plus interest to the bank.
Required:
1. Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold (round all calculations to the nearest dollar).
1. Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold (round all calculations to the nearest dollar).
2. Prepare any necessary adjusting entries at December 31, 2011. Adjusting
entries are only recorded at year- end
(round all calculations to the nearest dollar).
3.
Prepare a schedule showing the effect of the journal entries in requirements 1
and 2 on 2011 income before taxes.
P7-14 (Page 389) -El Gato Painting Company
P7-14 El Gato Painting Company
maintains a checking account at American Bank. Bank statements are prepared at
the end of each month. The November 30, 2011, reconciliation of the bank
balance is as follows:
Balance
per bank, November 30 $3,231
Add:
Deposits outstanding 1,200
less:
Checks outstanding
#363
$123
#365
201
#380
56
#381
86
#382
340 (806)
Adjusted
balance per bank, November 30 $3,625
The
company's general ledger checking account showed the following for December:
Balance
December 1 $3,625
Receipts
42,650
Disbursements
(41,853)
Balance,
December $4,422
The
December bank statement contained the following information:
Balance,
December 1 $3,231
Deposits 43,000
Checks
processed (41,918)
Service
charges (22)
NSF
checks (440)
Balance,
December 31 $3,851)
The
checks that were processed by the bank in December include all of the
outstanding checks at the end of November except for check #365. In addition,
there are some December checks that had not been processed by the bank by the
end of the month. Also, you discover that check #411 for $320 was correctly
recorded by the bank but was incorrectly recorded on the books as a $230
disbursement for advertising expense. Included in the bank's deposits is a
$1,300 deposit incorrectly credited to the company's account. The deposit
should have been posted to the credit of the Los Gatos Company. The NSF checks
have not been redeposited and the company will seek payment from the customers
involved.
Required:
1.
Prepare a bank reconciliation for the El Gato checking account at December 31,
2011
2.
Prepare any necessary adjusting journal entries indicated.
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