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Intermediate accounting questions




Question;7.3 The former bookeeper of White Electric Supply is serving time in prision for embezzling nearly $416,000 in less than five years. Like so many other ordinary employees, she started out by taking only small amounts. By the time she was caught, she was stealing lump sums of $5,000 and 10,000. Her method was crude and simple. She would write a check for the correct amount payable to a supplier for say, $15,000. However, she would record in the companys check register an amount significantly greater, say, $20,000. She would then write a check payable to herself for the $5,000 difference. In the check register, next to the number of each check she had deposited in her personal bank account, she would write the "void," making it appear as though the ceck had been destroyed. This process went undected for nearly five years.A. What controls must have been lacking at White Electric Supply to enable the bookeeper to steal nearly $416,000 before being caught?B. What the bookkeeper did was definitely unethical. But what if one of her grandchildren had been ill and needed an expensive operation? If this had been the case, would it have been ethical for her to take company funds to pay for the operation if she intended to pay the company back in full? Defend your answer7.5 Shown below is the information needed to prepare a bank reconciliation for Warren Electric at December 31:1. At December 31, cash per the bank statement was $15,200, cash per the company's records was $17,500.2. Two debit memoranda accompanied the bank statement: service charges for December of $25, and a $775 check drawn by Jane Jones marked "NSF."3. Cash receipts of $10,000 on December 31 were not deposited until January 4.4. The following checks had been issued in December but were not included among the paid checks returned by the bank: no. 620 for $1,000, no. 630 for $3,000, and no. 641 for $4,500.Requireda. Prepare a bank reconciliation at December 31.b. Prepare the necessary journal entry or entries to update the accounting recordsc. Assume that the company normally is not required to pay a bank service charge if it maintains a minimum average daily balance of $1000 throughout the month. If the company average daily balance for December had been $8000, why did it have to pay a $25 service charge7.7Many companies hold a significant portion of their financial assets in the form of marketable securities. For example, Microsoft Corporation recently reported investments in marketable securities totaling $ 25.3 billion, an amount equal to 59 percent of its total financial assets. In contrast, only 26 percent of its financial assets were in the form of accounts receivable.a. Define marketable securities (also referred to as short- term investments). What characteristics of these securities justify classifying them as financial assets?b. What is the basic advantage of Microsoft Corporation keeping financial assets in the form of marketable securities instead of cash? Is there any disadvantage?c. Explain how Microsoft Corporation values these investments in its balance sheet.d. Discuss whether the valuation of marketable securities represents a departure from (1) the cost principle and (2) the objectivity principle.e. Explain how fair value accounting benefits the users of Microsoft Corporation ? s financial statements7.9 The following information was taken from recent annual reports of the GOODYEAR TIRE RUBBER, and PPL ENERGY CO, a public utility.Net Sales......... Gooyear = $19.6 billion.... PPL $5.1 billionAverage Accounts Receivable.... Goodyear = 3.1 billion......PPL = $376 milliona. Compute for each company the accounts receivable turnover rate for the year.b. Compute for each company the average number of days required to collect outstanding receivables. (round to nearest whole day0c. Explain why the figures computed for Good Year in parts a. and b. Are so different then those computed for PPL.7.14 7.14On August 1, 2011, Hampton Construction received a 9 percent, six- month note receivable from Dusty Roads, one of Hampton Construction?s problem credit customers. Roads had owed $ 36,000 on an outstanding account receivable. The note receivable was taken in settlement of this amount. Assume that Hampton Construction makes adjusting entries for accrued interest revenue once each year on December 31.a. Journalize the following four events on the books of Hampton Construction.1. Record the receipt of the note on August 1 in settlement of the account receivable.2. Record accrued interest at December 31, 2011.3. Assume that Dusty Roads pays the note plus accrued interest in full. Record the collection of the principal and interest on January 31, 2012.4. Assume that Dusty Roads did not make the necessary principal and interest payment on January 31, 2012. Rather, assume that he defaulted on his obligation. Record the default on January 31, 2012.7.6 Tyson Furniture has $100,000 in excess cash that it wants to invest in one or more cash equivalents. The treasurer has researched two money market accounts and two certificates of deposit (CDs) offered by four major banks. This is the information she gathered:PenaltyMinimum Interest for Early FinancialInvestment Institution Investment Type Investment Rate Withdrawal? RiskNexity Bank Money market account $ 1,000 0.5% No Very lowBank of America Money market account 50,000 1.0 No Very lowDiscover Bank 90-day CD 2,500 1.3 Yes Very lowCommerce Bank 90-day CD 100,000 1.4 Yes Very lowThe two 90-day certificates of deposit are FDIC insured for up to $100,000. The money market accounts are not FDIC insured.Suggest how Tyson Furniture might allocate its $100,000 cash among these four opportunities.Discuss the trade-offs that management must consider.


Paper#43450 | Written in 18-Jul-2015

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