In the course of routine checking of all
(1)
Work in Process Inventory Cash | 25,000 | 25,000 |
(This is for materials put into process, I don’t find the record that we paid for these, so I’m crediting Cash because I know we’ll have to pay for them sooner or later.)
(2)
Manufacturing |
12,000 | 12,000 |
(This is for bonuses paid to salespeople. I know they’re part of overhead, and I can’t Und an account called “Non-Factory Overhead” or “Other Overhead” so I’m putting it in Manufacturing Overhead. I have the check stubs, so I know we paid these.)
(3)
Wages Expense Cash | 120,000 | 120,000 |
(This is for the factory workers’ wages. I have a note that employer payroll taxes arc $18,000. I still think that’s part of wages expense and that we’ll have to pay it all in cash sooner or later, so 1 credited Cash for the wages and the taxes.)
(4)
Work in Process Inventory Raw Materials Inventory | 3,000 | 3,000 |
(This is for the glue used in the factory. I know we used this to make the products, even though we didn’t use very much on any one of the products. I got it out of inventory, so I credited an inventory account.)
Instructions
(a) How should Joe have recorded each of the four events?
(b) If the entry was not corrected, which financial statements (income statement or
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Managerial Accounting: Tools for Business Decision Making
- The following misstatements are included in the accounting records of Westgate Manufacturing Company.1. Each month, a fraudulent receiving report is submitted to accounting by anemployee in the receiving department. A few days later, he sends Westgate an invoicefor the quantity of goods ordered from a small company he owns and operates inthe evening. A check is prepared, and the amount is paid when the receiving reportand the vendor’s invoice are matched by the accounts payable clerk.2. Telephone expense (account 2112) was unintentionally charged to repairs andmaintenance (account 2121).3. The accounts payable clerk prepares a monthly check to Story Supply Company forthe amount of an invoice owed and submits the unsigned check to the treasurer forpayment along with related supporting documents that have already been approved.When she receives the signed check from the treasurer, she records it as a debit toaccounts payable and deposits the check in a personal bank account for a…arrow_forwardThe following misstatements are included in the accounting records of Westgate Manufacturing Company. Each month, a fraudulent receiving report is submitted to accounting by an employee in the receiving department. A few days later, he sends Westgate an invoice for the quantity of goods ordered from a small company he owns and operates in the evening. A check is prepared, and the amount is paid when the receiving report and the vendor’s invoice are matched by the accounts payable clerk. Telephone expense (account 2112) was unintentionally charged to repairs and maintenance (account 2121). Required: For each misstatement, identify the transaction-related audit objective that was not met. For each misstatement, state a control that should have prevented it from occurring on a continuing basis. For each misstatement, state a substantive audit procedure that could uncover it.arrow_forwardYou have been recently hired as an assistant controller for XYZ Industries, a large, publically held manufacturing company. Your immediate supervisor is the controller who also reports directly to the VP of Finance. The controller has assigned you the task of preparing the year-end adjusting entries. In the receivables area, you have prepared an aging accounts receivable and have applied historical percentages to the balances of each of the age categories. The analysis indicates that an appropriate estimated balance for the allowance for uncollectible accounts is $180,000. The existing balance in the allowance account prior to any adjusting entry is a $20,000 credit balance. After showing your analysis to the controller, he tells you to change the aging category of a large account from over 120 days to current status and to prepare a new invoice to the customer with a revised date that agrees with the new category. This will change the required allowance for uncollectible accounts…arrow_forward
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