EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 17, Problem 4P
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To determine: The annual net pre-tax benefits.
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Mighty Tools Hardware runs a network of small hardware retail outlets across the state. All salesare made for cash or on credit card and processed through electronic tills. A wide range of goodsare stocked by the stores, meaning that the business deals with a large number of suppliers. Allgoods are purchased on credit with varying terms, depending on the supplier. Invoices are paidby cheque after a package of documents is collated and approved for payment. Ordering of goodsand subsequent payments are processed by the central office with delivery direct from supplierto the stores — no central warehouse is used. Mighty Tools uses a perpetual stock system andconducts test counts at regular periods throughout the year.Required:(a) What controls should exist for inventory movements at the local store level and the centraloffice? (150-180 words)(b) Explain how the stocktake for Mighty Tools Hardware should be audited. What details aremost important? (230-250 words)
Mighty Tools Hardware runs a network of small hardware retail outlets across the state. All sales are made for cash or on credit card and processed through electronic tills. A wide range of goods are stocked by the stores, meaning that the business deals with a large number of suppliers. All goods are purchased on credit with varying terms, depending on the supplier. Invoices are paid by cheque after a package of documents is collated and approved for payment. Ordering of goods and subsequent payments are processed by the central office with delivery direct from supplier to the stores — no central warehouse is used. Mighty Tools uses a perpetual stock system and conducts test counts at regular periods throughout the year.
Required:
(a) What controls should exist for inventory movements at the local store level and the central office?
(b) Explain how the stocktake for Mighty Tools Hardware should be audited. What details are most important?
Mighty Tools Hardware runs a network of small hardware retail outlets across the state. All sales are made for cash or on credit card and processed through electronic tills. A wide range of goods are stocked by the stores, meaning that the business deals with a large number of suppliers. All goods are purchased on credit with varying terms, depending on the supplier. Invoices are paid by cheque after a package of documents is collated and approved for payment. Ordering of goods and subsequent payments are processed by the central office with delivery direct from supplier to the stores — no central warehouse is used. Mighty Tools uses a perpetual stock system and conducts test counts at regular periods throughout the year.
Required:
What controls should exist for inventory movements at the local store level and the central office?
Explain how the stocktake for Mighty Tools Hardware should be audited. What details are most important?
Chapter 17 Solutions
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