Prefix Supply Company received a 120-day, 8% note for $450,000, dated April 9, from a customer on account.

a. Determine the due date of the note.

b. Determine the maturity value of the note.

c. Journalize the entry to record the receipt of the payment of the note at maturity.

Prefix Supply Company received a 120-day, 8% note for $450,000, dated April 9 from a customer on account.

Determine the due date of the note.

A former chairman, CFO, and controller of Donnkenny, Inc., an apparel company that makes sportswear for Pierre Cardin and Victoria Jones, pleaded guilty to financial statement fraud. These managers used false journal entries to record fictitious sales, hid inventory in public warehouses so that it could be recorded as "sold," and required sales orders to be backdated so that the sale could be moved to an earlier period. The combined effect of these actions caused $\$ 25$ million out of $\$ 40$ million in quarterly sales to be phony.

a. Why might control procedures listed in this chapter be insufficient in stopping this type of fraud?

b. How could this type of fraud be stopped?

All-Around Sound Co. discovered a fraud whereby one of its front office administrative employees used the company funds to purchase goods, such as computers, digital cameras, and other electronic items for her own use. The fraud was discovered when employees noticed an increase in delivery frequency from vendors and the use of unusual vendors. After some investigation, it was discovered that the employee would alter the description or change the quantity on an invoice in order to explain the cost on the bill.

A former chairman, CFO, and controller of Donnkenny, Inc., an apparel company that makes sportswear for Pierre Cardin and Victoria Jones, pleaded guilty to financial statement fraud. These managers used false journal entries to record fictitious sales, hid inventory in public warehouses so that it could be recorded as “sold,” and required sales orders to be backdated so that the sale could be moved back to an earlier period. The combined effect of these actions caused $25 million out of$40 million in quarterly sales to be phony.

Why might control procedures listed in this chapter be insufficient in stopping this type of fraud?

The procedures used for over-the-counter receipts are as follows. At the close of each day’s business, the sales clerks count the cash in their respective cash drawers, after which they determine the amount recorded by the cash register and prepare the memo cash form, noting any discrepancies. An employee from the cashier’s office counts the cash, compares the total with the memo, and takes the cash to the cashier’s office.

a. Indicate the weak link in internal control

Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31:

$$\begin{array}{lr} \text { Customer } & \text { Amount } \\ \hline \text { Shawn Brooke } & \$ 4,650 \\ \text { Eve Denton } & 5,180 \\ \text { Art Malloy } & 11,050 \\ \text { Cassie Yost } & 9,120 \\ \hline \text { Total } & \$ 30,000 \\ \hline \hline \end{array}$$

Journalize the write-offs under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during the year. Based on past history and industry averages, 3/4% of credit sales are expected to be uncollectible.

A firm has consistently adjusted its allowance account at the end of the fiscal year by adding a fixed percent of the period’s sales on account. After seven years, the balance in Allowance for Doubtful Accounts has become very large in relationship to the balance in Accounts Receivable. Explain.

Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2014:

a. Journalize the write-offs for 2014 under the direct write-off method.

Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2014:

b. Journalize the write-offs for 2014 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during 2014. Based on past history and industry averages, 3/4% of credit sales are expected to be uncollectible.

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item, as shown in previous Exhibit.

John owns a second home in Palm Springs, CA. During the year, he rented the house for $5,000 for 56 days and used the house for 14 days during the summer. The house remained vacant during the remainder of the year.

The expenses for the home included$5,000 in mortgage interest, $850 in property taxes,$900 for utilities and maintenance, and $3,500 in depreciation.

What is John’s deductible rental loss, before considering the passive loss limitations?

A chart of accounts for a merchandising business

A.) usually is the same as the chart of accounts for a service business

B.) usually is standardized by the FASB for all merchandising businesses

C.) usually requires more accounts than does the chart of accounts for a service business

D.) always uses a three-digit numbering system

Based on the given problem, at the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6).

• a. Insurance expired during May is $275.
• b. Supplies on hand on May 31 are$715.
• c. Depreciation of office equipment for May is $330.
• d. Accrued receptionist salary on May 31 is$325.
• e. Rent expired during May is $1,600.
• f. Unearned fees on May 31 are$3,210.