The following annual account balances are from Armour Sports at December 31.

	Year 2	Year 1
Accounts receivable	$   100,000	$   85,000
Net sales	2,500,000	2,000,000

a. What is the change in the number of days’ sales uncollected between Year 1 and Year 2? (Round the number of days to one decimal.)

The following information is available for Hapley Co.

• November 30 bank statement shows a $1,895 balance.
• The general ledger shows a$1,742 balance at November 30.
• A $795 deposit placed in the bank’s night depository on November 30 does not appear on the November 30 bank statement.
• Outstanding checks amount to$638 at November 30.
• A customer’s $320 note was collected by the bank and deposited in Hapley’s account in November.
• A bank service charge of$10 is deducted by the bank and appears on the November 30 bank statement.

How will the customer’s note appear on Hapley’s November 30 bank reconciliation?

• a. $320 appears as an addition to the book balance of cash.
• b.$320 appears as a deduction from the book balance of cash.
• c. $320 appears as an addition to the bank balance of cash.
• d.$320 appears as a deduction from the bank balance of cash.
• e. $335 appears as an addition to the bank balance of cash

The following are five separate cases involving internal control issues.

a. Chi Han receives all incoming customer cash receipts for her employer and posts the customer payments to their respective accounts.

b. At Tico Company, Julia and Trevor alternate lunch hours. Julia is the petty cash custodian, but if someone needs petty cash when she is at lunch, Trevor fills in as custodian.

c. Nori Nozumi posts all patient charges and payments at the Hopeville Medical Clinic. Each night Nori backs up the computerized accounting system but does not password lock her computer.

d. Ben Shales prides himself on hiring quality workers who require little supervision. As office manager, Ben gives his employees full discretion over their tasks and for years has seen no reason to perform independent reviews of their work.

e. Carla Farah’s manager has told her to reduce costs. Carla decides to raise the deductible on the plant’s property insurance from $5,000 to$10,000. This cuts the property insurance premium in half. In a related move, she decides that bonding the plant’s employees is a waste of money because the company has not experienced any losses due to employee theft. Carla saves the entire amount of the bonding insurance premium by dropping the bonding insurance.

Required

1. For each case, identify the principle(s) of internal control that is violated.

2. Recommend what should be done to adhere to principles of internal control in each case.

Harriet Knox, Ralph Patton, and Marcia Diamond work for a family physician, Dr. Gwen Conrad, who is in private practice. Dr. Conrad is knowledgeable about office management practices and has segregated the cash receipt duties as follows. Knox opens the mail and prepares a triplicate list of money received. She sends one copy of the list to Patton, the cashier, who deposits the receipts daily in the bank. Diamond, the recordkeeper, receives a copy of the list and posts payments to patients’ accounts. About once a month the office clerks have an expensive lunch they pay for as follows. First, Patton endorses a patient’s check-in Dr. Conrad’s name and cashes it at the bank. Knox then destroys the remittance advice accompanying the check. Finally, Diamond posts payment to the customer’s account as a miscellaneous credit. The three justify their actions by their relatively low pay and knowledge that Dr. Conrad will likely never miss the money.

Required

1. Who is the best person in Dr. Conrad’s office to reconcile the bank statement?

2. Would a bank reconciliation uncover this office fraud?

3. What are some procedures to detect this type of fraud?

4. Suggest additional internal controls that Dr. Conrad could implement.

The following are five separate cases involving internal control issues.

a. Tywin Company keeps very poor records of its equipment. Instead, the company asserts its employees are honest and would never steal from the company.

b. Marker Theater has a computerized order-taking system for its tickets. The system is backed up once a year.

c. Sutton Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.

d. The owner of Super Pharmacy uses a check software/printer to prepare checks, making it difficult for anyone to alter the amount of a check. The check software/printer, which is not password protected, is on the owner’s desk in an office that contains company checks and is normally unlocked.

e. To ensure the company retreat would not be cut, the manager of Lavina Company decided to save money by canceling the external audit of internal controls.

Required

1. For each case, identify the principle(s) of internal control that is violated.

2. Recommend what should be done to adhere to principles of internal control in each case.

Santana Rey receives the March bank statement for Business Solutions on April 11, 2020. The March 31 bank statement shows an ending cash balance of $67,566. The general ledger Cash account, No. 101, shows an ending cash balance per books of$68,057 as of March 31 (prior to any reconciliation). A comparison of the bank statement with the general ledger Cash account, No. 101, reveals the following.

a. The bank erroneously cleared a $500 check against the company account in March that S. Rey did not issue. The check was actually issued by Business Systems.

b. On March 25, the bank statement lists a$50 charge for a safety deposit box. Santana has not yet recorded this expense.

c. On March 26, the bank statement lists a $102 charge for printed checks that Business Solutions ordered from the bank. Santana has not yet recorded this expense.

d. On March 31, the bank statement lists$33 interest earned on Business Solutions’s checking account for the month of March. Santana has not yet recorded this revenue.

e. S. Rey notices that the check she issued for $128 on March 31, 2020, has not yet cleared the bank.

f. S. Rey verifies that all deposits made in March do appear on the March bank statement.

Required

1. Prepare a bank reconciliation for Business Solutions for the month ended March 31, 2020.

2. Prepare any necessary adjusting entries. Use Miscellaneous Expenses, No. 677, for any bank charges. Use Interest Revenue, No. 404, for any interest earned on the checking account for March.

List the seven broad principles of internal control.

Indicate which statements are true and which are false.

______ 1. Separation of recordkeeping for assets from the custody over assets helps reduce fraud.

______ 2. The primary objective of internal control procedures is to safeguard the business against theft from government agencies.

______ 3. Internal control procedures should be designed to protect assets from waste 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 himself.

The General Ledger tool in Connect automates several of the procedural steps in the accounting cycle so that the financial professional can focus on the impacts of each transaction on the various financial reports.

General Ledger assignment, based on the second problem in the problem set A of this chapter, focuses on transactions related to the petty cash fund and highlights the impact each transaction has on net income, if any. Prepare the journal entries related to the petty cash fund and assess the impact of each transaction on the company’s net income, if any.

Identify the internal control principle that was violated in each of the following separate situations.

a. The recordkeeper left town after the owner discovered a large sum of money had disappeared. An audit found that the recordkeeper had written and signed several checks made payable to his fiancée and recorded the checks as salaries expense.

b. An employee was put in charge of handling cash. That employee later stole cash from the business. The company incurred an uninsured loss of $184,000.

c. There is$500 in cash missing from a cash register drawer. Three salesclerks shared the cash register drawer, so the owner cannot determine who is at fault.

Use Apple's financial statements in Appendix A to answer the following.

1. Identify the total amount of cash and cash equivalents for fiscal years ended (a) September 30, 2017, and (b) September 24, 2016.

2. Compute cash and cash equivalents as a percent (rounded to one decimal) of total current assets, total current liabilities, total shareholders’ equity, and total assets at fiscal year-end for both 2017 and 2016.

3. Compute the percent change (rounded to one decimal) between the beginning and ending year amounts of cash and cash equivalents for fiscal years ended (a) September 30, 2017, and (b) September 24, 2016.

4. Compute the days’ sales uncollected (rounded to one decimal) as of (a) September 30, 2017, and (b) September 24, 2016.

5. Does Apple’s collection of receivables show a favorable or unfavorable change?

What is the purpose of a health screening? How can it prevent injury during physical activity?

New York City is on eastern standard time, St Louis is on central standard time (1 hour earlier than eastern standard time), and Las Vegas is on Pacific standard time (3 hours earlier than eastern standard time). A flight leaves New York City at 9 A.M. eastern standard time, stops for 50 min in St. Louis, and arrives in Las Vegas at 1:35 P.M. Pacific time. How long is the plane actually flying ?

SALES OF CLock Radios Sales of a certain stereo clock radio are approximated by the relationship $S(x)=6000 x+30,000$ $(0 \leq x \leq 5)$, where $S(x)$ denotes the number of clock radios sold in year $x(x=0$ corresponds to the year 2008). Find the number of clock radios expected to be sold in 2012 .