Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 2E
(a)
To determine
Explain the procedure of tagging a control device with inventory items in the store is appropriate.
(b)
To determine
Explain the procedure of not locking the store’s stockroom is appropriate.
(c)
To determine
Explain the procedure of record the amount of inventory received from vendor’s invoice is appropriate.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
RISK ANALYSIS AND INTERNAL CONTROL
The following describes the purchases and cash disbursements procedures for a lawn and garden supply wholesaler that uses a central computer system with distributed terminals in departments.
The inventory control clerk visually reviews inventory levels from his computer terminal to identify items that need to be ordered. He then prints and sends a hard copy purchase requisition for the needed items to the purchasing agent. Based on the requisition, the purchasing agent selects a vendor and adds a digital record to the purchase order file from his terminal in the purchasing department. The clerk then prints a hard copy of the purchase order and mails it to the vendor. Finally, the purchasing agent destroys the purchase requisition, which it is no longer needed since the relevant details are on the PO.
When the materials arrive at the receiving department a receiving clerk prints a copy of the purchase order from his terminal and reconciles it to the…
A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure?
Group of answer choices
1.The person in accounts payable should generate the purchase order.
2.The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received.
3.No changes would be made since the person paying the bills is different from the person ordering the inventory.
4.The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.
What internal control or procedure(s) would provide protection against the following threats?
A purchasing agent orders materials from a supplier that he partially owns
Receiving-department steal inventory and then claim the inventory was sent to the warehouse.
An unordered supply of laser printer paper delivered to the office is accepted and paid for because the “price is right.” After all of the laser printers are jammed, however, it becomes obvious that the “bargain” paper is of inferior quality.
The company fails to take advantage of a 1% discount for promptly paying a vendor invoice
Inventory records show that an adequate supply of copy paper should be in stock, but none is available on the supply shelf
Chapter 6 Solutions
Financial And Managerial Accounting
Ch. 6 - Before inventory purchases are recorded, the...Ch. 6 - Why is it important to take a physical inventory...Ch. 6 - Prob. 3DQCh. 6 - If inventory is being valued at cost and the price...Ch. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - The inventory at the end of the year was...Ch. 6 - Prob. 9DQCh. 6 - Prob. 10DQ
Ch. 6 - Cost flow methods The following three identical...Ch. 6 - Perpetual inventory using FIFO Beginning...Ch. 6 - Perpetual inventory using LIFO Beginning...Ch. 6 - Beginning inventory, purchases, and sales for...Ch. 6 - The units of an item available for sale during the...Ch. 6 - On the basis of the following data, determine the...Ch. 6 - Effect of inventory errors During the taking of...Ch. 6 - Financial statement data for years ending December...Ch. 6 - Control of inventories Triple Creek Hardware Store...Ch. 6 - Prob. 2ECh. 6 - Perpetual inventory using FIFO Beginning...Ch. 6 - Perpetual inventory using LIFO Assume that the...Ch. 6 - Perpetual inventory using LIFO Beginning...Ch. 6 - Perpetual inventory using FIFO Assume that the...Ch. 6 - FIFO and LIFO costs under perpetual inventory...Ch. 6 - Weighted average cost flow method under perpetual...Ch. 6 - Weighted average cost flow method under perpetual...Ch. 6 - Assume that the business in Exercise 6-9 maintains...Ch. 6 - Assume that the business in Exercise 6-9 maintains...Ch. 6 - The units of an item available for sale during the...Ch. 6 - Periodic inventory by three methods; cost of goods...Ch. 6 - Prob. 14ECh. 6 - On the basis of the following data, determine the...Ch. 6 - Based on the data in Exercise 6-15 part (a) and...Ch. 6 - Effect of errors in physical inventory Madison...Ch. 6 - Fonda Motorcycle Shop sells motorcycles, ATVs, and...Ch. 6 - Error in inventory During 20Y5, the accountant...Ch. 6 - Retail method A business using the retail method...Ch. 6 - Retail method A business using the retail method...Ch. 6 - Retail method A business using the retail method...Ch. 6 - Retail method On the basis of the following data,...Ch. 6 - Prob. 24ECh. 6 - Gross profit method Based on the following data,...Ch. 6 - Gross profit method Based on the following data,...Ch. 6 - FIFO perpetual inventory The beginning inventory...Ch. 6 - The beginning inventory at Midnight Supplies and...Ch. 6 - The beginning inventory for Midnight Supplies and...Ch. 6 - Periodic inventory by three methods The beginning...Ch. 6 - Periodic inventory by three methods Dymac...Ch. 6 - Lower-of-cost-or-market inventory Data on the...Ch. 6 - Retail method; gross profit method Selected data...Ch. 6 - FIFO perpetual inventory The beginning inventory...Ch. 6 - LIFO perpetual inventory The beginning inventory...Ch. 6 - Prob. 3PBCh. 6 - Periodic inventory by three methods The beginning...Ch. 6 - Pappas Appliances uses the periodic inventory...Ch. 6 - Lower-of-cost-or-market inventory Data on the...Ch. 6 - Retail method; gross profit method Selected data...Ch. 6 - Amazon.com, Inc. (AMZN) is one of the largest...Ch. 6 - Darden Restaurants, Inc. (DRI) is the largest...Ch. 6 - The general merchandise retail industry has a...Ch. 6 - Monster Beverage Corporation (MNST) develops,...Ch. 6 - Ethics in Action Sizemo Elektroniks sells...Ch. 6 - Anstead Co. is experiencing a decrease in sales...Ch. 6 - Communication Golden Eagle Company began...
Knowledge Booster
Similar questions
- A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? A. No changes would be made since the person paying the bills is different from the person ordering the inventory. B. The person in accounts payable should generate the purchase order. C. The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. D. The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.arrow_forwardWhich of the following procedures would best prevent or detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars?a. Maintain a perpetual inventory of only the more valuable items with frequent periodic verification of the accuracy of the perpetual inventory record.b. Have an independent accounting firm prepare an internal control report on the effectiveness of the controls over inventory.c. Have separate warehouse space for the more valuable items with frequent periodic physical counts and comparison to perpetual inventory records.d. Require a manager’s signature for the removal of any inventory item with a value of morethan $50.arrow_forwardSam Fenton wants to ensure that sales in a retail outlet are not recorded at the wrong amount. Which preventive control will help him ensure his objective? O The signature of the goods by the warehouse receiver on a receiving report or a bill of lading. O A credit check by the credit manager. O Automatic pricing of sales invoices using a master price file. O None of the above.arrow_forward
- What internal control procedure(s) would provide protection against the following threats? a. Theft of goods by the shipping dock workers, who claim that the inventory shortages reflect errors in the inventory records.b. Posting the sales amount to the wrong customer account because a customer account number was incorrectly keyed into the system .c. Making a credit sale to a customer who is already four months behind in making payments on his account. d. Authorizing a credit memo for a sales return when the goods were never actually returned. e. Writing off a customer’s accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer. f. Billing customers for the quantity ordered when the quantity shipped was actually less due to back ordering of some items .g. Lost sales because of stockouts of several products for which the computer records indicated there was adequate quantity on hand. h. A sales clerk sold a $7,000 wide-screen TV…arrow_forwardSawicki Music Supply is a mail-order business that accepts merchandise orders by telephone and mail. All payments must be prepaid with a major credit card. Once an order is received, either the item is found in inventory and shipped immediately, the item is not found in inventory and is ordered from the manufacturer, or a notice is sent to the customer indicating that the item is no longer stocked. Required Prepare a context, intermediate, and elementary-level data flow diagram for Sawicki Music Supply. For the elementary-level diagram, explode the inventory function.arrow_forwardA fraudulent sales order was prepared by an order entry clerk in an attempt to steal merchandise from an organization. This fraud would most likely be detected by: Question 6 options: Using pre-numbered sales orders. Verifying that the sales order has been prepared correctly. Requiring that all sales orders by supported by an approved customer purchase order. Proper segregation of duties.arrow_forward
- Lenter Supply Company is a medium-sized distributor of wholesale hardware supplies in the central Ohio area. It has been a client of yours for several years and has instituted excellent internal controls for sales at your recommendation. In providing control over shipments, the client has prenumbered “warehouse removal slips” that are used for every sale. It is company policy never to remove goods from the warehouse without an authorized warehouse removal slip. After shipment, two copies of the warehouse removal slip are sent to billing for the computerized preparation of a sales invoice. One copy is stapled to the duplicate copy of a prenumbered sales invoice, and the other copy is filed numerically. In some cases, more than one warehouse removal slip is used for billing one sales invoice. The smallest warehouse removal slip number for the year is 11741 and the largest is 34687. The smallest sales invoice number is 45302 and the largest is 65747. In the audit of sales, one of the…arrow_forwardLenter Supply Company is a medium-sized distributor of wholesale hardware supplies in the central Ohio area. It has been a client of yours for several years and has instituted excellent internal controls for sales at your recommendation. In providing control over shipments, the client has prenumbered “warehouse removal slips” that are used for every sale. It is company policy never to remove goods from the warehouse without an authorized warehouse removal slip. After shipment, two copies of the warehouse removal slip are sent to billing for the computerized preparation of a sales invoice. One copy is stapled to the duplicate copy of a prenumbered sales invoice, and the other copy is filed numerically. In some cases, more than one warehouse removal slip is used for billing one sales invoice. The smallest warehouse removal slip number for the year is 11741 and the largest is 34687. The smallest sales invoice number is 45302 and the largest is 65747. In the audit of sales, one of the…arrow_forwardDiscuss whether the following situations are improper segregation functions. Support your answer with reasonable grounds. A. The purchasing department prepares the customer’s invoice and the accounts receivable department sends it to the customer’s account. B. The sales department approves the sales credit memo upon product return, and payment on the customer’s account is made by the accounts receivable department. C. The shipping department sends the goods that have been picked up from the warehouse by the warehouse staff. D. The general accounting department posts to the general ledger account after receiving the journal voucher provided by the billing department E. The human resources department appoints employees and also pays employees ’salariesarrow_forward
- Triple Creek Hardware Store currently uses a periodic inventory system. Kevin Carlton, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system.Kevin is unhappy with the periodic inventory system because it does not provide timely information on inventory levels. Kevin has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling items are on hand.Kevin is also concerned about lost sales while a physical inventory is being taken. Triple Creek Hardware currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Kevin believes that closing the store is the only way to get an accurate inventory count. Will switching to a perpetual inventory system strengthen Triple Creek Hardware’s control over inventory items? Will switching to a perpetual inventory system eliminate the need for a physical inventory…arrow_forwardCase analysis 2 FTW corporation sells computer peripherals and related devices, such as printers, ink, flash drives and cables. FTW has a staff of three purchasing agents, each of whom oversees a specific set of inventory items. Each purchasing agent uses his/her discretion in making decisions about when to order inventory, how much inventory to order, and which vendor to purchase from. When ordered inventory arrives at FTW, one of two receiving clerks matches the items, quantities, and vendors against a copy of the purchase order, then either stocks the merchandise on the shelves or puts it in the storeroom. FTW's accountant receives a copy of the invoice from the vendor, as well as an e-mail from one of the receiving clerks indicating that merchandise has been received. The e-mail also includes the relevant purchase order number. The accountant files the invoice by date in a filing cabinet; once a week, the accountant removes invoices from the filing cabinet and pats them by…arrow_forwardFashion Forward, a clothing distributor, wants to ensure it has strong information system controls over the purchasing and payables cycle. Which of the following should be implemented? A. The same person should do the buying and the receiving; however, that person should not have access to the accounting records to ensure appropriate segregation of duties. B. Only accept requisitions against the account code entered by all employees who have identified that goods are needed. ☐ C. There should be a periodic check of invoices where no goods have been received. D. The computer should check the requisition against the inventory master file to confirm that the re-order point has been reached. E. Orders placed for supplies not on the approved list should be accepted if they are needed. F. Receiving should enter the details of goods received on the computer against the order. G. Details of invoices should be entered into the computer on receipt, and the computer will match the invoice with…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeAuditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning