The Medical Center has a single operating room that is used by local physicians to perform surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physician surgical time, and operating room overhead. On November 1 of the current year, the annual operating room overhead is estimated to be:
Disposable supplies $150,000
Depreciation expense 27,000
Utilities 5,500
Nurse salaries 225,500
Technician wages 74,000
Total operating room overhead $492,000
The overhead costs will be assigned to procedures based on the number of surgical room hours. The Medical Center expects to use the operating room an average of eight hours per day, six days per week. In addition, the operating room will be shut down two weeks per year for general repairs.
a. Determine the predetermined operating room overhead rate for the year.
b. Gretchen Kelton had a 6 hour procedure on November 10. How much operating room overhead would be charged to her procedure, using the rate determined in part (a)?
c. During November, the operating room was used 192 hours. The actual overhead costs incurred for November were $38,500. Determine the overhead under-or over- applied for the period.
Click here for the solution: The Medical Center has a single operating room that is used by local physicians to perform surgical procedures
Showing posts with label procedures. Show all posts
Showing posts with label procedures. Show all posts
Wednesday, October 14, 2015
Friday, October 9, 2015
Aldstadt Company has the following internal control procedures over cash receipts
ACC 290 Week 5 Assignment
BE7-4 Aldstadt Company has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure.
(a) All over-the-counter receipts are registered on cash registers.
(b) All cashiers are bonded.
(c) Daily cash counts are made by cashier department supervisors.
(d) The duties of receiving cash, recording cash, and having custody of cash are assigned to different individuals.
(e) Only cashiers may operate cash registers.
Click here for the solution: Aldstadt Company has the following internal control procedures over cash receipts
BE7-4 Aldstadt Company has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure.
(a) All over-the-counter receipts are registered on cash registers.
(b) All cashiers are bonded.
(c) Daily cash counts are made by cashier department supervisors.
(d) The duties of receiving cash, recording cash, and having custody of cash are assigned to different individuals.
(e) Only cashiers may operate cash registers.
Click here for the solution: Aldstadt Company has the following internal control procedures over cash receipts
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)
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
The following are examples of audit procedures
Auditing P 7-30 The following are examples of audit procedures:
1. Review the accounts receivable with the credit manager to evaluate their collectibility.
2. Stand by the payroll time clock to determine whether any employee "punches in" more than one time.
3. Count inventory items and record the amount in the audit files.
4. Obtain a letter from the clients attorney addressed to the CPA firm stating that the attorney is not aware of any existing lawsuits.
5. Extend the cost of inventory times the quantity on an inventory listing to test whether it is accurate.
6. Obtain a letter from an insurance company to the CPA firm stating the amount of the fire insurance coverage on buildings and equipment.
7. Examine an insurance policy stating the amount of the fire insurance coverage on buildings and equipment.
8. Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year.
9. Obtain information about internal control by requesting the client to fill out a questionnaire.
10. Trace the total on the cash disbursements journal to the general ledger.
11. Watch employees count inventory to determine whether company procedures are being followed.
12. Examine a piece of equipment to make sure that a major acquisition was actually received and is in operation.
13. Calculate the ratio of sales commission expense to sales as a test of sales commissions.
14. Examine corporate minutes to determine the authorization of the issue of bonds.
15. Obtain a letter from management stating that there are no unrecorded liabilities.
16. Review the total of repairs and maintenance for each month to determine whether any months total was unusually large.
17. Compare a duplicate sales invoice with the sales journal for customer name and amount.
18. Add the sales journal entries to determine whether they were correctly totaled.
19. Make a petty cash count to make sure that the amount of the petty cash fund is intact.
20. Obtain a written statement from a bank stating that the client has $15,671 on deposit and liabilities of $500,000 on a demand note.
Required:
Classify each of the preceding items according to the eight types of audit evidence:
1. physical examination 2. confirmation 3. documentation 4. analytical procedures 5. inquiries 6. recalculation 7. reperformance 8. Observation
Click here for the solution: The following are examples of audit procedures
1. Review the accounts receivable with the credit manager to evaluate their collectibility.
2. Stand by the payroll time clock to determine whether any employee "punches in" more than one time.
3. Count inventory items and record the amount in the audit files.
4. Obtain a letter from the clients attorney addressed to the CPA firm stating that the attorney is not aware of any existing lawsuits.
5. Extend the cost of inventory times the quantity on an inventory listing to test whether it is accurate.
6. Obtain a letter from an insurance company to the CPA firm stating the amount of the fire insurance coverage on buildings and equipment.
7. Examine an insurance policy stating the amount of the fire insurance coverage on buildings and equipment.
8. Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year.
9. Obtain information about internal control by requesting the client to fill out a questionnaire.
10. Trace the total on the cash disbursements journal to the general ledger.
11. Watch employees count inventory to determine whether company procedures are being followed.
12. Examine a piece of equipment to make sure that a major acquisition was actually received and is in operation.
13. Calculate the ratio of sales commission expense to sales as a test of sales commissions.
14. Examine corporate minutes to determine the authorization of the issue of bonds.
15. Obtain a letter from management stating that there are no unrecorded liabilities.
16. Review the total of repairs and maintenance for each month to determine whether any months total was unusually large.
17. Compare a duplicate sales invoice with the sales journal for customer name and amount.
18. Add the sales journal entries to determine whether they were correctly totaled.
19. Make a petty cash count to make sure that the amount of the petty cash fund is intact.
20. Obtain a written statement from a bank stating that the client has $15,671 on deposit and liabilities of $500,000 on a demand note.
Required:
Classify each of the preceding items according to the eight types of audit evidence:
1. physical examination 2. confirmation 3. documentation 4. analytical procedures 5. inquiries 6. recalculation 7. reperformance 8. Observation
Click here for the solution: The following are examples of audit procedures
Sunday, September 6, 2015
Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data
Auditing P 7-37
Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. They range from simple comparisons to the use of complex models involving many relationships and elements of data. They involve comparisons of recorded amounts, or ratios developed from recorded amounts, to expectations developed by the auditors.
a. Describe the broad purposes of analytical procedures.
b. When are analytical procedures required during an audit Explain why auditors use analytical procedures extensively in all parts of the audit.
c. Describe the factors that influence the extent to which an auditor will use the results of analytical procedures to reduce detailed tests in meeting audit objectives.
Click here for the solution: Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data
Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. They range from simple comparisons to the use of complex models involving many relationships and elements of data. They involve comparisons of recorded amounts, or ratios developed from recorded amounts, to expectations developed by the auditors.
a. Describe the broad purposes of analytical procedures.
b. When are analytical procedures required during an audit Explain why auditors use analytical procedures extensively in all parts of the audit.
c. Describe the factors that influence the extent to which an auditor will use the results of analytical procedures to reduce detailed tests in meeting audit objectives.
Click here for the solution: Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data
Wednesday, September 2, 2015
Analytical procedures are an important part of the audit process and consist of the evaluation of financial information
Auditing P 8-31 Analytical procedures are an important part of the audit process and consist of the evaluation of financial information by the study of plausible relationships among financial and nonfinancial data. Analytical procedures may be done during planning, as a substantive test, or as a part of the overall review of an audit.
The following are various statements regarding the use of analytical procedures:
1. Not required during this stage.
2. Should focus on enhancing the auditor’s understanding of the client’s business and the transactions and events that have occurred since the last audit date.
3. Should focus on identifying areas that may represent specific risks relevant to the audit.
4. Do not result in detection of misstatements.
5. Designed to obtain evidential matter about particular assertions related to account balances or classes of transactions.
6. Generally use data aggregated at a lower level than the other stages.
7. Should include reading the financial statements and notes to consider the adequacy of evidence gathered.
8. Involve reconciliation of confirmation replies with recorded book amounts.
9. Use the preliminary or unadjusted working trial balance as a source of data.
10. Expected to result in a reduced level of detection risk.
Required
For each of the 10 statements, select the stage of the audit for which the statement is most accurate using the following responses:
1. Planning the audit
2. Substantive testing
3. Overall review
4. Statement is not correct concerning analytical procedures.*
Click here for the solution: Analytical procedures are an important part of the audit process and consist of the evaluation of financial information
The following are various statements regarding the use of analytical procedures:
1. Not required during this stage.
2. Should focus on enhancing the auditor’s understanding of the client’s business and the transactions and events that have occurred since the last audit date.
3. Should focus on identifying areas that may represent specific risks relevant to the audit.
4. Do not result in detection of misstatements.
5. Designed to obtain evidential matter about particular assertions related to account balances or classes of transactions.
6. Generally use data aggregated at a lower level than the other stages.
7. Should include reading the financial statements and notes to consider the adequacy of evidence gathered.
8. Involve reconciliation of confirmation replies with recorded book amounts.
9. Use the preliminary or unadjusted working trial balance as a source of data.
10. Expected to result in a reduced level of detection risk.
Required
For each of the 10 statements, select the stage of the audit for which the statement is most accurate using the following responses:
1. Planning the audit
2. Substantive testing
3. Overall review
4. Statement is not correct concerning analytical procedures.*
Click here for the solution: Analytical procedures are an important part of the audit process and consist of the evaluation of financial information
Saturday, August 22, 2015
The following control procedures are used in Falk Company for over-the-counter cash receipts
E4-3 The following control procedures are used in Falk Company for over-the-counter cash receipts.
1. Cashiers are experienced; thus, they are not bonded.
2. All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.
3. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attache case in the stock room until it is deposited in the bank.
4. At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total.
5. The company accountant makes the bank deposit and then records the day's receipts.
a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.
b) For each weakness, suggest a change in the procedure that will result in good internal control
Click here for the solution: The following control procedures are used in Falk Company for over-the-counter cash receipts
1. Cashiers are experienced; thus, they are not bonded.
2. All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.
3. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attache case in the stock room until it is deposited in the bank.
4. At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total.
5. The company accountant makes the bank deposit and then records the day's receipts.
a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.
b) For each weakness, suggest a change in the procedure that will result in good internal control
Click here for the solution: The following control procedures are used in Falk Company for over-the-counter cash receipts
Friday, August 21, 2015
Exman Company performed a study of its billing and collection procedures and found that an average of 8 days elapses
Exman Company performed a study of its billing and collection procedures and found that an average of 8 days elapses between the time when a customer’s payment is received and when the funds become usable by the firm. The firm’s annual sales are $540 million.
a. Assuming that Exman could reduce the time required to process customer payments by 1.5 days, determine the increase in the firm’s average cash balance.
b. Assuming that these additional funds could be used to reduce the firm’s outstanding bank loans (current interest rate is 8 percent) by an equivalent amount, determine the annual pretax savings in interest expenses.
Click here for the solution: Exman Company performed a study of its billing and collection procedures and found that an average of 8 days elapses
a. Assuming that Exman could reduce the time required to process customer payments by 1.5 days, determine the increase in the firm’s average cash balance.
b. Assuming that these additional funds could be used to reduce the firm’s outstanding bank loans (current interest rate is 8 percent) by an equivalent amount, determine the annual pretax savings in interest expenses.
Click here for the solution: Exman Company performed a study of its billing and collection procedures and found that an average of 8 days elapses
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