ACC 305 Week 3

ACC 305 Week 3 Quiz

Assignments

Communication Case 6-3 on page 334

Harvey Alexander, an all-league professional football player, has just declared free agency. Two teams, the San Francisco 49ers and the Dallas Cowboys, have made Harvey the following offers to obtain his services:

49ers: $1 million signing bonus payable immediately and an annual salary of $1.5 million for the five-year term of the contract.

Cowboys: $2.5 million signing bonus payable immediately and an annual salary of $1 million for the five-year term of the contract.

With both contracts, the annual salary will be paid in one lump sum at the end of the football season.

Required:

You have been hired as a consultant to Harveys agent, Phil Marks, to evaluate the two contracts. Write a short letter to Phil with your recommendation including the method you used to reach your conclusion. Assume that Harvey has no preference between the two teams and that the decision will be based entirely on monetary considerations. Also assume that Harvey can invest his money and earn an 8% annual return.

Judgment Case 7-5 on page 391

For each of the following independent situations, indicate the apparent internal control weaknesses and suggest alternative procedures to eliminate the weaknesses.

1. John Smith is the petty cash custodian. John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, John submits a list of all accounts and amounts to be charged and a check is written to him for the total amount. John is the only person ever to tally the fund.

2. All of the companys cash disbursements are made by check. Each check must be supported by an approved voucher, which is in turn supported by the appropriate invoice and, for purchases, a receiving document. The vouchers are approved by Dean Leiser, the chief accountant, after reviewing the supporting documentation. Betty Hanson prepares the checks for Leisers signature. Leiser also maintains the companys check register (the cash disbursements journal) and reconciles the bank account at the end of each month.

3. Fran Jones opens the companys mail and makes a listing of all checks and cash received from customers. A copy of the list is sent to Jerry McDonald who maintains the general ledger accounts. Fran prepares and makes the daily deposit at the bank. Fran also maintains the subsidiary ledger for accounts receivable, which is used to generate monthly statements to customers.

P7-10 (Page 388) - Evergreen Company

Evergreen Company sells lawn and garden products to wholesalers. The companys fiscal year-end is December 31. During 2011, the following transactions related to receivables occurred:

Required:

1.Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold (round all calculations to the nearest dollar).

2.Prepare any necessary adjusting entries at December 31, 2011. Adjusting entries are only recorded at year- end (round all calculations to the nearest dollar).

3.Prepare a schedule showing the effect of the journal entries in requirements 1 and 2 on 2011 income before taxes.

P7-14 (Page 389) -El Gato Painting Company (also see included excel file)

El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at the end of each month. The November 30, 2011, reconciliation of the bank balance is as follows:

Required:

1.Prepare a bank reconciliation for the El Gato checking account at December 31, 2011.

1. Prepare any necessary adjusting journal entries indicated.