a.
To determine: The net pre-tax benefits if annual sales are $15 million.
a.
Answer to Problem 6P
The net pre-tax benefits if annual sales are $15 million is $8,630.14.
Explanation of Solution
Determine the annual pre-tax earnings
Therefore, the amount of funds released is $8,630.14.
Determine the additional collection costs
Therefore, the additional collection costs is $14,250.
Determine the net pre-tax benefits
Therefore, the net pre-tax benefits is -$5,619.86.
b.
To determine: The net pre-tax benefits if annual sales are $75 million.
b.
Answer to Problem 6P
The net pre-tax benefits if annual sales are $75 million is $28,900.68.
Explanation of Solution
Determine the net pre-tax benefits
Therefore, the net pre-tax benefits is -$28,900.68.
c.
To determine: The net pre-tax benefits if annual sales are $15 million with 2 days of collection time.
c.
Answer to Problem 6P
The net pre-tax benefits if annual sales are $15 million is $2,753.42.
Explanation of Solution
Determine the net pre-tax benefits
Therefore, the net pre-tax benefits is $2,753.42.
d.
To determine: The net pre-tax benefits if annual sales are $75 million with 2 days of collection time.
d.
Answer to Problem 6P
The net pre-tax benefits if annual sales are $75 million is $25,767.12.
Explanation of Solution
Determine the net pre-tax benefits
Therefore, the net pre-tax benefits is $25,767.12.
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Chapter 17 Solutions
CONTEMP.FINANCIAL MGMT. (LL)-W/MINDTAP
- draw the system flow chart for the following narrative? Cornick, Inc. sells office products to businesses in the eastern region of the United States. Each month, the IT division at Cornick prints monthly statements and sends them to the accounts receivable (AR) department, where a clerk mails them to the customers. Cornick’s custo- mers mail their payments back to Cornick, where a clerk in AR batches the checks and sends them to the cashier. The AR clerk then uses the payment stub to enter the payments into the computer, where the AR master data are updated to record the paymentarrow_forwardDouglas and Son, Inc., uses the following process for its cash receipts: The company typically receives cash and check sales each day and places them in a single drawer. Each Friday, the cash clerk records the amount of cash received and deposits the money in the bank account. Each quarter, the controller requests information from the bank necessary to prepare a bank reconciliation.Required:Discuss Douglas and Son’s internal control procedures related to cash receipts, noting both weaknesses and strengths.arrow_forwardNext, consider the case of Washburn Flooring Company: The management at Washburn Flooring has determined that it takes an average of 6 days for checks the company writes to clear its bank account. Cash receipts from customers are reflected in Washburn's bank account an average of 2 days after the checks are received. On an average day, Washburn writes checks that total $40,000, and it receives checks from customers that total $50,000. Compute the collection float, the disbursement float, and the net float in dollars in the following table. (Note: By definition, collection float is always considered negative, and disbursement float is always positive. Both should be shown as positive numbers here. The net float, however, should be shown as positive if it is favorable and as negative if it is unfavorable.) Washburn Flooring Company Float Calculations Collection float Disbursement float Net float Given this information, you can deduce that on an average day, Washburn Flooring's bank…arrow_forward
- Consider the following independent situations: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 lists all checks and cash received from customers. A…arrow_forwardSteve Ramos owns apartment buildings in Baguio City, and Tagaytay City. Each property has a manager who collects rent, arranges for repairs, and runs advertisements in the local newspaper. The property managers transfer cash to Ramos monthly and prepare their own bank reconciliations. The manager in Baguio City has been stealing large sums of money. To cover the theft, he understates the amount of the outstanding checks on the monthly bank reconciliation. As a result, each monthly bank reconciliation appears to balance. However, the balance sheet reports more cash than Ramos actually has in the bank. In negotiating the sale of the Baguio City property, Ramos is showing the balance sheet to prospective investors. Based on Case 3, identify two parties other than Ramos who can be harmed by this theft. In what ways can they be harmed?arrow_forwardSteve Ramos owns apartment buildings in Baguio City, and Tagaytay City. Each property has a manager who collects rent, arranges for repairs, and runs advertisements in the local newspaper. The property managers transfer cash to Ramos monthly and prepare their own bank reconciliations. The manager in Baguio City has been stealing large sums of money. To cover the theft, he understates the amount of the outstanding checks on the monthly bank reconciliation. As a result, each monthly bank reconciliation appears to balance. However, the balance sheet reports more cash than Ramos actually has in the bank. In negotiating the sale of the Baguio City property, Ramos is showing the balance sheet to prospective investors. 1. Identify two parties other than Ramos who can be harmed by this theft. In what ways can they be harmed? 2. Discuss the role accounting plays in this situation.arrow_forward
- Snake Creek Company has a trusted employee who, as the owner said, “handles all of the bookkeeping and paperwork for the company.” This employee is responsible for counting, verifying, and recording cash receipts and payments, making the weekly bank deposit, preparing cheques for major expenditures (signed by the owner), making small expenditures from the cash register for daily expenses, and collecting accounts receivable. The owner asked the local bank for a $20,000 loan. The bank asked that an audit be performed covering the year just ended. The independent auditor (a local CPA), in a private conference with the owner, presented some evidence of the following activities of the trusted employee during the past year: Cash sales sometimes were not entered in the cash register and the trusted employee pocketed approximately $50 per month. Cash taken from the cash register (and pocketed by the trusted employee) was replaced with expense memos with fictitious signatures (approximately…arrow_forwardACC Snake Creek Company has one trusted employee who, as the owner said, handles all of the book-keeping and paperwork for the company. This employee is responsible for counting, verifying, and recording cash receipts and payments, making the weekly bank deposit, preparing checks for major expenditures (signed by the owner), making small expenditures from the cash register for daily expenses, and collecting accounts receivable. The owners asked the local bank for a $ 20,000 loan. The bank asked that an audit be performed covering the year just ended. The independent auditor ( a local CPA), in a private conference with the owner, presented some evidence of the following activities of the trusted employee during the past year: a. Cash sales sometimes were not entered in the cash register, and the trusted employee pocketed approximately $ 50 per month. b. Cash taken from the cash register (and pocketed by the trusted employee) was replaced with expense memos with fictitious…arrow_forwardOn June 15, The Arab Bank received deposits by checks drawn on other local banks amount of $50000. In the clearance room, it found checks drawn on it clients current accounts amounted $ 35000. All checks were accepted. Journalize all necessary entries in the books of the Ara Bank and the central bank.arrow_forward
- Prepare a Bank Reconciliation Statement.The accountant of XYZ Company was tasked to perform monthly bank reconciliation. She downloaded the Company’s August 30 bank statement that showed a balance of P32,400. She also printed the cash ledger from the company’s computerized accounting system. It contains the ending balance of P8,850. She also found the following reconciling items:The bank statement showed bank service fee of P850.The bank collected P1,800 from a note receivable for ABM Company. Also, a collection fee of P200 was charged.Deposit in transit, P51,000Checks outstanding on September 30, P79,200The accountant found a check issued to ML Corporation, for P5,400 that cleared the bank but was not in the cash ledger.arrow_forwardThe accountant of Jonathan Manufacturing Company was tasked to perform monthly bank reconciliation. She downloaded the company's April 30 bank statement that showed a balance of P32,400. She also printed the cash ledger from the company's computerized accounting system. It contains the ending balance of P8,350. She also found the following reconciling items: a. The bank statement showed bank service fee of P800 b. The bank collected P1,500 from a note receivable for Jonathan Manufacturing. Also, a collection fee of P250 was charged. c. Deposits in transit, P51,000. d. Checks outstanding on May 31, P79,100. e. The accountant found a check issued to Rhys Corp. for P4,50 that cleared the bank but was not in the cash ledger. Required: Prepare a Bank Reconciliation Statementarrow_forwardThe following describes the cash receipts procedures for a medium-sized online and catalog-based retailer. Customer payments come directly to the general mail room along with other mail items. The customer payments mail constitutes about 20 percent of the total mail received each day. The mail room clerks sort through the mail, open the customer payment envelopes, remove the customer checks and remittance advices, and reconcile the two documents. The mail room supervisor then sends the reconciled checks and remittance advices to the AR clerk, who posts the amounts received to the customer AR subsidiary ledger and the cash receipts journal from her computer terminal. The AR clerk then manually prepares a remittance list of all checks received, endorses the checks “for deposit only” and sends the checks and remittance list to the treasurer. Finally, the clerk files the remittance advices in the AR department. Once the checks and remittance list arrive at the Treasury department, the…arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT