The worksheet of Bridget's Office Supplies contains the following revenue, cost, and expense accounts. The merchandise inventory amounted to $58,475 on January 1, 2019, and $51,425 on December 31, 2019. The expense accounts numbered 611 through 617 represent selling expenses, and those numbered 631 through 646 represent general and administrative expenses.

Prepare a classified income statement for this firm for the year ended December 31, 2019.

Similar to what you did with the Revenue Cycle, I want you to prepare a planning document for the audit of Apollo Shoes as of December 31, 2017, listing the major errors that could occur in the purchasing system and to describe the tests of control procedures for auditing related purchasing controls required to determine whether reliable control exists.  I don’t think that Apollo has enough purchase transactions that we need to rely on the controls (in other words, we’ll audit all transactions), but we need to document our findings for our audit of internal controls over financial reporting. I suggest formatting the planning document in the following manner.

In the first column, use an index number (S-# or W-#) to indicate potential strength or weakness. If you have time, you may want to prepare a purchasing cycle flowchart. Not required, but could be helpful.

In the second column, describe the control activity (or lack thereof) that may serve to prevent, detect, or correct errors or frauds. Understand that Apollo may or may not have the control activity in place. If they do, we may test the control if that is cost-effective. If they don’t, we can propose the control as a management letter comment.

In the third column, describe the audit implications of the strengths/weaknesses related to the control activities with respect to transactions or accounts reported in the financial statements (e.g., the presence of a properly completed purchase order check ensures that purchases are authorized).

In the fourth column, describe specifically how (recalculation, reperformance, inquiry and observation, etc.) you would test the control.

Finally, add a fifth column for compensating audit procedures. If the control activity is not in place, or the control activity is in place but not effective, we need to determine what audit procedure (i.e., a compensating test) we could use to catch them. (For example, we can use customer confirmations to test the validity of the transactions if we can’t rely on the client’s controls.)

The employee prepares a purchase requisition and has a supervisor approve it. The supervisor retains Copy 2 of the pre-numbered purchase requisition for the department, sends Copy 1 to the Purchasing Department and Copy 3 to Accounts Payable.

When the Purchase Department receives the purchase requisition, they search the approved vendor list and consult the listed prices for the goods desired for each vendor. Once a vendor has been selected, five copies of a pre-numbered purchase order are prepared. Copy 5 is retained in the purchasing department and filed with the accompanying purchase requisition. Copy 2 is sent back to the department who prepared the purchase requisition, where both source documents are filed by number together. Copy 3 is sent to the Receiving Department. However, their copy is modified so that the quantity of the items ordered is blacked-out. Copy 4 is sent to Accounts Payable. Copy 1 of the purchase order is sent to the selected vendor.

When the goods are received, the invoice is sent to Accounts Payable and the packing slip is retained in Receiving. The Receiving department verifies the order by comparing the external packing slip with the internal purchase order. Then they count and inspect the items received. The blacked-out purchase order helps to ensure accurate counting of the items ordered. To further assure that the items received are counted, the receiving clerk is required to sign the receiving report. Once the manual process is complete, the inventory file is updated to reflect the goods received and three copies of a pre-numbered receiving report are prepared. Copy 1 and the goods received are sent to the department that requested the items, where it is filed with the accompanying purchase requisition and purchase order. The Receiving Department files Copy 2 of the receiving report with the packing slip and their copy of the purchase order. Copy 3 of the receiving report is sent to A/P where it, the purchase order, and the purchase requisition are compared to the vendor’s invoice for accuracy. The voucher package is then filed according to payment date. This allows the potential for taking any vendor discounts offered. When payment is due, a disbursement voucher is prepared and is sent to the cashier and the voucher package is sent to the Finance Department.

Upon receipt of the disbursement voucher, the cashier will review, sign and cancel the disbursement voucher and prepare a check. The VP of Finance will sign the check after reviewing it with the voucher package for consistency and accuracy. The VP of Finance cancels the voucher package and sends it to A/P. The canceled disbursement voucher is sent to A/P from the cashier, where it is matched and filed with the accompanying canceled voucher package. The VP of Finance sends a copy of each signed check to A/P. The copy is then attached to the canceled voucher package and canceled disbursement voucher and filed as paid. A journal entry is recorded to show the payment of the payable.

Question 1

In terms of when to recognise tax and other sovereign revenue in financial years, explain why might the governmental organisations responsible treat the following differently:

 property taxes (e.g., Rates)

 sales taxes (e.g., Goods and Services Tax), and

 court fines (e.g., penalties on motorists for parking or speeding infringements).

Auditing the Revenue Process

You have been assigned to the first audit of the Black Clover company for the year ending March 31, 2019. Accounts receivable were confirmed on December 31, 2018, and at that date, the receivables consisted of approximately 200 accounts with balances totaling $956,750. Fifty of these accounts, with balances totaling $650,725, were selected for confirmation. All but 10 of the confirmation requests have been returned; 24 were returned without any exceptions, 6 had minor differences that have been cleared satisfactorily, and 10 confirmations had the following information and comments:

1. We are sorry, but we cannot answer your request for confirmation of our account as the Kingdom Company uses an accounts payable voucher system and can only confirm individual invoices.
2. The balance of $1,050 was paid on December 28, 2018.
3. The balance of $7,750 was paid on January 5, 2019.
4. The balance of $2,975 was paid on December 13, 2018.
5. We do not owe you anything on December 31, 2018, as the goods, represented by your invoice date December 30, 2018, number 25050, in the amount of $11,550, were received on January 5, 2019, on FOB destination terms.
6. An advance payment of $2,500 made by us in November 2018 should cover the two invoices totaling $1,350 shown on the statement attached.
7. This confirmation was returned as undeliverable by the post office.
8. We are contesting the propriety of this $12,525 charge. We think the charge is excessive.
9. We do not owe this balance as our agreement with the company allows us to return any unsold goods without penalty. Amount okay. As the goods have been shipped to us on consignment, we will remit payment upon selling the goods.
10. Your credit memo dated December 5, 2018, in the amount of $440 cancels the balance above.

Required

1. Indicate which of these confirmation responses likely represent timing differences
2. Which of the 10 confirmation repossess likely represents a misstatement? Explain why the response indicates a misstatement.
3. For each of the 10 confirmation responses, indicate the procedures you would perform to determine whether the exception is a misstatement or has been appropriately recorded by the client.

Gift cards are popular with marketing executives, but they create accounting questions. Should revenue be recorded at the time the gift card is sold, or when it is used by the customer?

Suppose a customer purchases a $100 gift card at Best Buy on December 24, 2019, and gives it to his wife on December 25, 2019. On January 3, 2020, the customer’s wife uses the card to purchase CDs. When do you think Best Buy should recognize revenue, and why?

FedEx Corporation had the following revenue and expense account balances (in millions) for a recent year ending May 31:

The owner of Showtime Movie Theaters, Inc., would like to predict weekly gross revenue as a function of advertising expenditures. Historical data for a sample of eight weeks follow. Weekly Gross Revenue ($1000s) Televison Advertising ($1000s) Newspaper Advertising ($1000s) 97 5 1.5 90 2 3 96 4 2.5 92 2.5 2.5 95 3 3.3 95 3.5 2.3 95 2.5 4.2 95 3 3.5 Use = .01 to test the hypotheses for the model y = 0 + 1 x 1 + 2 x 2 + , where Compute the F test statistic (to 2 decimals). Use F table. What is the p-value? What is your conclusion? Use = .05 to test the significance of 1. Compute the t test statistic (to 2 decimals). Use t table. What is the p-value? What is your conclusion? Should x 1 be dropped from the model? Use = .05 to test the significance of 2. Compute the t test statistic (to 2 decimals). Use t table. What is the p-value? What is your conclusion? Should x 2 be dropped from the model? Hide Feedback Partially Correct Check My Work Icon Key Question 2 of 2 Exercise 15.23 (Self-Test) Algorithmic

Eligibility and Benefits Verification – Before patients are scheduled to be seen, their insurance coverage must be verified.

Co-pay Collection – Collection costs increase when co-pays are not paid upfront.

Patient Financial Counseling – Available to patients who are unable to make their co-pay or at risk for not paying their balance after insurance.

Case Management – A collection of services including utilization management, discharge planning, and care coordination performed by a case manager.

What else can be add it to this

need to add more information

Discuss the four basic business activities that are performed in the revenue cycle (Sales order entry, Shipping, Billing, Cash collection) and  how can Information technology can assist these business activities to improve the efficiency and effectiveness of the firm.

In 175 words or more give some common examples of accrued revenue and accrued expenses that may occur in a business. Discuss why they arise, how they are recorded, and why it is necessary to record them.