Government and Not-for-Profit Accounting
E. 9-3 Internal service funds are accounted for similarly to businesses
William County opted to account for its duplication service center in an internal service fund. Previously the center had been accounted for in the county’s general fund. During the first month in which it was accounted for as an internal service fund the center engaged in the following transactions:
1. Five copiers were transferred to the internal service fund from the government’s general capital assets. At the time of transfer the copiers had a book value (net of accumulated depreciation) of $70,000.
2. The general fund made an initial cash contribution of $35,000 to the internal service fund.
3. The center borrowed $270,000 from a local bank to finance the purchase of additional equipment and renovation of its facilities. It issued a three-year note.
4. It purchased equipment for $160,000 and paid contractors $100,000 for improvements to its facilities.
5. It billed the county clerk’s office $5,000 for printing services, of which the office remitted $2,500.
6. It incurred, and paid in cash, various operating expenses of $9,000.
7. The fund recognized depreciation of $1,500 on its equipment and $900 on the improvements to its facilities.
a. Prepare journal entries in the internal service fund to record the transactions.
b. Comment on the main differences resulting from the shift from the general fund to an internal service fund in how the center's assets and liabilities would be accounted for and reported
Click here for the solution: William County opted to account for its duplication service center in an internal service fund
Showing posts with label internal. Show all posts
Showing posts with label internal. Show all posts
Monday, April 18, 2016
Thursday, November 26, 2015
Nonfinancial measures for internal quality performance include all but which of the following
1. (TCO 11) Nonfinancial measures for internal quality performance include all but which of the following? (Points: 3)
2. (TCO 11) _____________________________is a formal means of distinguishing between random and nonrandom variation in an operating process. (Points: 3)
3. (TCO 11) Which of the following is NOT one of the steps in managing bottlenecks under the theory of constraints? (Points: 3)
4. (TCO 11) Design engineering is an example of: (Points: 3)
5. (TCO 11) Regal Products has a budget of $900,000 in 20X6 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $60,000 in variable costs. The new method will require $18,000 in training costs and $120,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000 units. Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appraisal costs of $30,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54 per failed unit. The company's average external failures average 3% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories. How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures? (Points: 3)
6. (TCO 12) The amount of time between when a customer places an order for a product or requests a service to when the product or service is delivered to that customer is called (Points: 3)
7. (TCO 12) The costs associated with storage are an example of which cost category? (Points: 3)
8. (TCO 12) The economic order quantity ignores: (Points: 3)
9. (TCO 12) ) The ________ describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers. (Points: 3)
10. (TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a production run is $30. There are no flag displays on hand but Liberty had scheduled 60 equal production runs of the display sets for the coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days per year. Assume that sales occur uniformly throughout the year and that production is instantaneous. If Liberty Celebrations does not maintain a safety stock, the estimated total carrying cost for the flag displays for the coming year is the estimated total setup cost for the flag displays for the coming year is (Points: 3)
Click here for the solution: Nonfinancial measures for internal quality performance include all but which of the following
2. (TCO 11) _____________________________is a formal means of distinguishing between random and nonrandom variation in an operating process. (Points: 3)
3. (TCO 11) Which of the following is NOT one of the steps in managing bottlenecks under the theory of constraints? (Points: 3)
4. (TCO 11) Design engineering is an example of: (Points: 3)
5. (TCO 11) Regal Products has a budget of $900,000 in 20X6 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $60,000 in variable costs. The new method will require $18,000 in training costs and $120,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000 units. Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appraisal costs of $30,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54 per failed unit. The company's average external failures average 3% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories. How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures? (Points: 3)
6. (TCO 12) The amount of time between when a customer places an order for a product or requests a service to when the product or service is delivered to that customer is called (Points: 3)
7. (TCO 12) The costs associated with storage are an example of which cost category? (Points: 3)
8. (TCO 12) The economic order quantity ignores: (Points: 3)
9. (TCO 12) ) The ________ describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers. (Points: 3)
10. (TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a production run is $30. There are no flag displays on hand but Liberty had scheduled 60 equal production runs of the display sets for the coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days per year. Assume that sales occur uniformly throughout the year and that production is instantaneous. If Liberty Celebrations does not maintain a safety stock, the estimated total carrying cost for the flag displays for the coming year is the estimated total setup cost for the flag displays for the coming year is (Points: 3)
Click here for the solution: Nonfinancial measures for internal quality performance include all but which of the following
Friday, October 9, 2015
Ndon Company has the following internal control procedures over cash disbursements (ACC 290 Week 5)
ACC 290 Week 5 Assignment
BE7-6 Ndon Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure.
(a) Company checks are prenumbered.
(b) The bank statement is reconciled monthly by an internal auditor.
(c) Blank checks are stored in a safe in the treasurer’s office.
(d) Only the treasurer or assistant treasurer may sign checks.
(e) Check signers are not allowed to record cash disbursement transactions.
Click here for the solution: Ndon Company has the following internal control procedures over cash disbursements (ACC 290 Week 5)
BE7-6 Ndon Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure.
(a) Company checks are prenumbered.
(b) The bank statement is reconciled monthly by an internal auditor.
(c) Blank checks are stored in a safe in the treasurer’s office.
(d) Only the treasurer or assistant treasurer may sign checks.
(e) Check signers are not allowed to record cash disbursement transactions.
Click here for the solution: Ndon Company has the following internal control procedures over cash disbursements (ACC 290 Week 5)
What is the role of the Sarbanes-Oxley Act of 2002 in relation to the types of internal controls used by corporations
ACC 290 Week 5 Assignment
Answer the following summary question: What is the role of the Sarbanes-Oxley Act of 2002 in relation to the types of internal controls used by corporations such as those illustrated in Exercises 7-4, 7-5, and 7-6?
Click here for the solution: What is the role of the Sarbanes-Oxley Act of 2002 in relation to the types of internal controls used by corporations
Answer the following summary question: What is the role of the Sarbanes-Oxley Act of 2002 in relation to the types of internal controls used by corporations such as those illustrated in Exercises 7-4, 7-5, and 7-6?
Click here for the solution: What is the role of the Sarbanes-Oxley Act of 2002 in relation to the types of internal controls used by corporations
Sunday, September 27, 2015
You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft
Ethics Case 17-6 401(k) plan contributions
You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft. VXI began a defined contribution pension plan three years ago. The plan is a so-called 401(k) plan (named after the Tax Code section that specifies the conditions for the favorable tax treatment of these plans) that permits voluntary contributions by employees. Employees' contributions are matched with one dollar of employer contribution for every two dollars of employee contribution. Approximately $500,000 of contributions is deducted from employee paychecks each month for investment in one of three employer-sponsored mutual funds.
While performing some preliminary audit tests, you happen to notice that employee contributions to these plans usually do not show up on mutual fund statements for up to two months following the end of pay periods from which the deductions are drawn. On further investigation, you discover that when the plan was first begun, contributions were invested within one week of receipt of the funds. When you question the firm's investment manager about the apparent change in the timing of investments, you are told, “Last year Mr. Maxwell (the CFO) directed me to initially deposit the contributions in the corporate investment account. At the close of each quarter, we add the employer matching contribution and deposit the combined amount in specific employee mutual funds.”
Required:
1. What is Mr. Maxwell's apparent motivation for the change in the way contributions are handled?
2. Do you perceive an ethical dilemma?
Click here for the solution: You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft
You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft. VXI began a defined contribution pension plan three years ago. The plan is a so-called 401(k) plan (named after the Tax Code section that specifies the conditions for the favorable tax treatment of these plans) that permits voluntary contributions by employees. Employees' contributions are matched with one dollar of employer contribution for every two dollars of employee contribution. Approximately $500,000 of contributions is deducted from employee paychecks each month for investment in one of three employer-sponsored mutual funds.
While performing some preliminary audit tests, you happen to notice that employee contributions to these plans usually do not show up on mutual fund statements for up to two months following the end of pay periods from which the deductions are drawn. On further investigation, you discover that when the plan was first begun, contributions were invested within one week of receipt of the funds. When you question the firm's investment manager about the apparent change in the timing of investments, you are told, “Last year Mr. Maxwell (the CFO) directed me to initially deposit the contributions in the corporate investment account. At the close of each quarter, we add the employer matching contribution and deposit the combined amount in specific employee mutual funds.”
Required:
1. What is Mr. Maxwell's apparent motivation for the change in the way contributions are handled?
2. Do you perceive an ethical dilemma?
Click here for the solution: You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft
Wednesday, September 23, 2015
What are the major elements of an internal control over property, plant, and equipment?
What are the major elements of an internal control over property, plant,
and equipment? For the specific control procedures identified, indicate
their importance to the audit.
Click here for the solution: What are the major elements of an internal control over property, plant, and equipment?
Click here for the solution: What are the major elements of an internal control over property, plant, and equipment?
Sunday, September 20, 2015
The board of trustees of a local church is concerned about the internal accounting controls pertaining
The board of trustees of a local church is concerned about the internal
accounting controls pertaining to the offering collections made at
weekly services. They ask you to serve on a three-person audit team with
the internal auditor of the university and a CPA who has just joined
the church. At a meeting of the audit team and the board of trustees you
learn the following.
1. The church’s board of trustees has delegated responsibility for the financial management and audit of the financial records to the finance committee. This group prepares the annual budget and approves major disbursements but is not involved in collections or recordkeeping. No audit has been made in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years. The church does not carry any fidelity insurance.
2. The collection at the weekly service is taken by a team of ushers who volunteer to serve for 1 month. The ushers take the collection plates to a basement office at the rear of the church. They hand their plates to the head usher and return to the church service. After all plates have been turned in, the head usher counts the cash received. The head usher then places the cash in the church safe along with a notation of the amount counted. The head usher volunteers to serve for 3 months.
3. The next morning the financial secretary opens the safe and recounts the collection. The secretary withholds $150 – $200 in cash, depending on the cash expenditures expected for the week, and deposits the remainder of the collections in the bank. To facilitate the deposit, church members who contribute by check are asked to make their checks payable to “Cash.”
4. Each month the financial secretary reconciles the bank statement and submits a copy of the reconciliation to the board of trustees. The reconciliations have rarely contained any bank errors and have never shown any errors per books.
Instructions
(a) Indicate the weaknesses in internal accounting control in the handling of collections.
(b) List the improvements in internal control procedures that you plan to make at the next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial secretary, and (4) the finance committee.
(c) What church policies should be changed to improve internal control?
Click here for the solution: The board of trustees of a local church is concerned about the internal accounting controls pertaining
1. The church’s board of trustees has delegated responsibility for the financial management and audit of the financial records to the finance committee. This group prepares the annual budget and approves major disbursements but is not involved in collections or recordkeeping. No audit has been made in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years. The church does not carry any fidelity insurance.
2. The collection at the weekly service is taken by a team of ushers who volunteer to serve for 1 month. The ushers take the collection plates to a basement office at the rear of the church. They hand their plates to the head usher and return to the church service. After all plates have been turned in, the head usher counts the cash received. The head usher then places the cash in the church safe along with a notation of the amount counted. The head usher volunteers to serve for 3 months.
3. The next morning the financial secretary opens the safe and recounts the collection. The secretary withholds $150 – $200 in cash, depending on the cash expenditures expected for the week, and deposits the remainder of the collections in the bank. To facilitate the deposit, church members who contribute by check are asked to make their checks payable to “Cash.”
4. Each month the financial secretary reconciles the bank statement and submits a copy of the reconciliation to the board of trustees. The reconciliations have rarely contained any bank errors and have never shown any errors per books.
Instructions
(a) Indicate the weaknesses in internal accounting control in the handling of collections.
(b) List the improvements in internal control procedures that you plan to make at the next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial secretary, and (4) the finance committee.
(c) What church policies should be changed to improve internal control?
Click here for the solution: The board of trustees of a local church is concerned about the internal accounting controls pertaining
Sunday, September 13, 2015
Companies can gain efficiencies by implementing effective monitoring of their internal control processes
5-42 (Monitoring Activities) Companies can gain efficiencies by implementing effective monitoring of their internal control processes.
Required:
a. Explain the importance of monitoring and provide examples of monitoring.
b. Identify the important monitoring procedures that a company might use in assessing its controls over revenue recognition and costs that might be utilized in each of the following situations:
• A convenience store such as a 7-Eleven
• A chain restaurant such as Olive Garden
• A manufacturing division making rubberized containers for the consumer market
c. Can the auditor focus the assessment of internal control on testing the effectiveness of the company’s monitoring? Discuss and support your conclusion. Discuss, for example, the level of comfort the auditor can get about the effectiveness of other controls by testing the effectiveness of monitoring controls.
Click here for the solution: Companies can gain efficiencies by implementing effective monitoring of their internal control processes
Required:
a. Explain the importance of monitoring and provide examples of monitoring.
b. Identify the important monitoring procedures that a company might use in assessing its controls over revenue recognition and costs that might be utilized in each of the following situations:
• A convenience store such as a 7-Eleven
• A chain restaurant such as Olive Garden
• A manufacturing division making rubberized containers for the consumer market
c. Can the auditor focus the assessment of internal control on testing the effectiveness of the company’s monitoring? Discuss and support your conclusion. Discuss, for example, the level of comfort the auditor can get about the effectiveness of other controls by testing the effectiveness of monitoring controls.
Click here for the solution: Companies can gain efficiencies by implementing effective monitoring of their internal control processes
Tuesday, September 8, 2015
An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting
ACC 225 Week 8
Quick Study Exercise 8-1
An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.
1. What is the main objective of internal control procedures, and how is it achieved?
2. Why should recordkeeping for assets be separated from custody over the assets?
3. Why should the responsibility for a transaction be divided between two or more individuals or departments?
Click here for the solution: An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting
Quick Study Exercise 8-1
An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.
1. What is the main objective of internal control procedures, and how is it achieved?
2. Why should recordkeeping for assets be separated from custody over the assets?
3. Why should the responsibility for a transaction be divided between two or more individuals or departments?
Click here for the solution: An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting
For each of these five separate cases, identify the principle of internal control that is violated
ACC 225 Week 8
Problems 8-1B
For each of these five separate cases, identify the principle of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.
1. Latoya Tally is the company’s computer specialist and oversees its computerized payroll system. Her boss recently asked her to put password protection on all office computers. Latoya has put a password in place that allows only the boss access to the file where pay rates are changed and personnel are added or deleted from the payroll.
2. Lake Theater has a computerized order-taking system for its tickets. The system is active all week and backed up every Friday night.
3. X2U Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.
4. The owner of Super-Aid uses a check protector to perforate checks, making it difficult for anyone to alter the amount of the check. The check protector sits on the owner’s desk in an office
that contains company checks and is often unlocked.
5. LeAnn Company is a small business that has separated the duties of cash receipts and cash disbursements. The employee responsible for cash disbursements reconciles the bank account monthly.
Click here for the solution: For each of these five separate cases, identify the principle of internal control that is violated
Problems 8-1B
For each of these five separate cases, identify the principle of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.
1. Latoya Tally is the company’s computer specialist and oversees its computerized payroll system. Her boss recently asked her to put password protection on all office computers. Latoya has put a password in place that allows only the boss access to the file where pay rates are changed and personnel are added or deleted from the payroll.
2. Lake Theater has a computerized order-taking system for its tickets. The system is active all week and backed up every Friday night.
3. X2U Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.
4. The owner of Super-Aid uses a check protector to perforate checks, making it difficult for anyone to alter the amount of the check. The check protector sits on the owner’s desk in an office
that contains company checks and is often unlocked.
5. LeAnn Company is a small business that has separated the duties of cash receipts and cash disbursements. The employee responsible for cash disbursements reconciles the bank account monthly.
Click here for the solution: For each of these five separate cases, identify the principle of internal control that is violated
Saturday, August 22, 2015
Which of the following is NOT one of the purposes of internal control?
MULTIPLE CHOICE
1. Which of the following is NOT one of the purposes of internal control? (Points : 1)
2. Journal entries must be made to record the reconciling items on the bank side of the reconciliation. (Points : 1)
3. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1)
4. Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? (Points : 1)
5. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? (Points : 1)
6. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)
7. Which of the following is NOT a key element of good internal control? (Points : 1)
8. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? (Points : 1)
9. A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below.
Travel expense $120
Office supplies $200
Equipment rental expense $70
The journal entry to replenish the account would be which of the following: (Points : 1)
10. In a bank reconciliation, an NSF check will be shown on the bank side of the reconciliation. (Points : 1)
Click here for the solution: Which of the following is NOT one of the purposes of internal control?
1. Which of the following is NOT one of the purposes of internal control? (Points : 1)
2. Journal entries must be made to record the reconciling items on the bank side of the reconciliation. (Points : 1)
3. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1)
4. Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? (Points : 1)
5. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? (Points : 1)
6. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)
7. Which of the following is NOT a key element of good internal control? (Points : 1)
8. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? (Points : 1)
9. A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below.
Travel expense $120
Office supplies $200
Equipment rental expense $70
The journal entry to replenish the account would be which of the following: (Points : 1)
10. In a bank reconciliation, an NSF check will be shown on the bank side of the reconciliation. (Points : 1)
Click here for the solution: Which of the following is NOT one of the purposes of internal control?
Thursday, August 13, 2015
Billabong Tech uses the internal rate of return (IRR) to select projects
Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $15,000 and generates cash inflows of $8,000 per year for 4 years. Project Board Shorts requires an initial investment of $25,000 and produces cash inflows of $12,000 per year for 5 years.
Click here for the solution: Billabong Tech uses the internal rate of return (IRR) to select projects
Click here for the solution: Billabong Tech uses the internal rate of return (IRR) to select projects
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