Pasti Berhad values advertise and sell residential property on behalf of its customers. The company has been in business for only a short time and is preparing a cash budget for the first four months of the year 2020. The expected sales of residential properties are as follows.

The average price of each property is RM180,000 and Pasti Berhad charges a fee of 3% of the value of each property sold. Pasti Berhad receives 1% in the month of sale and the remaining 2% in the month after sale. The company has ten employees who are paid monthly. The average salary per employee is RM36,000 per year. If more than 20 properties are sold each month, each employee will be paid in that month a bonus of RM1,500 for each additional property sold.

Variable expenses are incurred at the rate of 50% of the value of each property sold and these expenses are paid in the month of sale. Fixed overheads of RM44,300 per month are paid in the month in which they arise. Pasti Berhad pays interest every three months on a loan of RM200,000 at a rate of 6% per year. The last interest payment in each year is paid in December.

Outstanding tax liability of RM95,800 is due to be paid in April. In the same month, Pasti Berhad intends to dispose of surplus vehicles, with a net book value of RM15,000, for RM20,000. The cash balance at the start of January 2020 is expected to be a deficit of RM40,000.

Required:
a) Prepare a monthly cash budget for the period from January to April. Your budget must clearly indicate each item of income and expenditure, and the opening and closing monthly cash balances.
b) Discuss the factors to be considered by Pasti Berhad in planning ways to invest any cash surplus forecast by its cash budgets.
c) Discuss the TWO (2) advantages and TWO (2) disadvantages to Pasti Berhad of using overdraft finance to fund any cash shortages forecast by its cash budgets.

The Dash Cell Phone Company charges customers a basic rate of $5 per month to send text messages. Additional rates are as follows:

• The first 100 messages per month, regardless of message length, are included in the basic bill.
• An additional three cents are charged for each text message after the 100th message, up to and including 300 messages.
• An additional two cents are charged for each text message after the 300th message.
• Federal, state, and local taxes add a total of 14 percent to each bill.

Design a flowchart or pseudocode for the following:

a. A program that accepts the following data about one customer's messages: area code (three digits), phone number (seven digits), and number of text messages sent. Display all the data, including the month-end bill both before and after taxes are added.

b. A program that continuously accepts data about text messages until a sentinel value is entered, and displays all the details.

c. A program that continuously accepts data about text messages until a sentinel value is entered, and displays details only about customers who send more than 100 text messages.

d. A program that continuously accepts data about text messages until a sentinel value is entered, and displays details only about customers whose total bill with taxes is over $10.

e. A program that prompts the user for a three-digit area code from which to select bills. Then the program continuously accepts text message data until a sentinel value is entered, and displays data only for messages sent from the specified area code.

Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, Levine receives an immediate money transfer to its account when it processes sales receipts. Suntrust assesses a 4% service charge for credit card sales. The second credit card that Levine accepts is the Continental Card. Levine batches its credit sales data to Continental on a daily basis, and the money is transferred to its account about 4 to 7 business days later. Continental assesses a 2.5% charge on sales for using its card.
  

  
Prepare journal entries to record the above selected credit card transactions of Levine Company.

1.)Record sale of merchandise for $10,000 and accepted the customer's Suntrust Bank Card. Suntrust receipt's are immediately deposited in Levine's bank account.

2.)Record the cost of goods sold, $7,390.

3.)Record sale of merchandise for $8,300 and accepted the customer's Continental Card. Transferred $8,300 of credit card receipts to Continental, requesting payment.

4.)Record the cost of goods sold, $5,378.

5.)Received Continental's check for the April 12 billing, less the service charge.

ABC Satellite, a satellite television company, sells satellite television service contracts to customers, usually for a 24-month period. ABC satellite is a fast-growing, high-paced company created by aggressive salesmen and saleswomen. The company’s success has made its owners very wealthy; many of them live a lavish lifestyle and drive luxury cars to work. The retention division of this company is responsible for contacting customers nearing the end of their contract and convincing the customer to renew their contract. Retention agents are paid a commission for each account that agrees to a new contract. The commission rate is considered by many employees to be below the industry standard. Over the past year, the retention division has undergone significant supervisor and manager turnover. The current manager has not had sufficient time or understanding to properly implement controls. Additionally, the new manager has been so busy playing catch up that he has yet to hold a training or orientation meeting for his department. The current process for paying commissions to retention agents on renewed accounts is as follows:

• The phone system records the verbal contract extension commitment.
• The retention agent attaches the audio recording to the customer’s accounting the ABC customer contract system (CCS); this acts as legal proof of contract.
• The retention agent then updates the customer contract date information in CCS.
• Each retention agent has a spreadsheet he or she uses to keep track of the account renewals for the month.
• The retention agent records the customer #, date of the contract extension, and length of a contract extension in his or her spreadsheet.
• At the end of each month the retention supervisor receives each agent’s spreadsheet and multiplies the total retention renewals submitted by the agent by his or her commission rate in order to calculate the total monthly commission.
• The supervisors do not maintain the spreadsheets.
• In order to get the payments processed quickly, the supervisors have less than four hours for receive all agents’ spreadsheets (usually each supervisor is responsible for 20+ agents) and submit the summary file to payroll.
• The supervisor records the total commission earned by each agent on a summarized spreadsheet, which is sent directly to payroll for payment.

Discussion Questions

1. Part of avoiding fraud is to create a positive work environment. Describe a few conditions mentioned within the case that could contribute to a poor work environment.

2. What symptoms should an auditor look for to determine if fraud is occurring within the retention department?

3. There are five primary control procedures or activities. List and explain one procedure you feel would be most effective in improving the control system of the retention department. Include in your explanation specific examples of controls that should be implemented.

To prepare think about this week's reading assignments and the identified discussion questions. Integrate these concepts and post your individual substantive response. Your original response should be approximately 400 words and uses specific examples from the case and readings. Your original posting is due on WEDNESDAY.

Next respond to a minimum of TWO of your colleagues’ postings in approximately 200 words each. Peer-to-peer responses are on SUNDAY. When responding to your colleagues in the course address their posing in one or more of the following ways:

• Ask a probing question.
• Share an insight from having read your colleagues’ posting.
• Offer and support an opinion.
• Validate an idea with your own experience.
• Make a suggestion.
• Expand on your colleague’s posting.

Engleside Seafood Company ships fresh seafood to customers in a nearby city. The logistics manager has identified three shipping alternatives. The first is to call a common carrier, the second is to lease its own fleet of refrigerated trucks and the third option is a contractual arrangement with a local carrier. The outcome of the decision will be affected by the demand level as indicated in the payoff table below.

ABC Company employs a periodic inventory system and sells its inventory to
customers for $32 per unit. ABC Company reported the following inventory
information for the month of May:

May 1    Beginning inventory 4,200 units @ $12 cost per unit
May 6    Purchased 2,000 units @ $9 cost per unit
May 8    Sold 3,000 units
May 13   Purchased 2,500 units @ $15 cost per unit
May 18   Sold 1,900 units
May 21   Purchased 4,000 units @ $8 cost per unit
May 28   Sold 2,200 units
May 30   Purchased 2,300 units @ $17 cost per unit

ABC Company reported operating expenses of $26,100 for May and they had a
tax rate of 34%.

A) Calculate the dollar amount of ending inventory shown on ABC Company's
May 31 balance sheet using the FIFO method.

B) Calculate the amount of gross profit shown on ABC Company's income statement
for May using the weighted average method.

C) Calculate the amount of net income shown on ABC Company's income statement
for May using the LIFO method.

A company is thinking about changing its credit policy to attract customers away from competitors. The present policy calls for a 1.37/10, net 30 cash discount. The new policy would call for a 3.48/10, net 50 cash discount. Currently, 21% of its customers are taking the discount, and it is anticipated that this number would go up to 60% with the new discount policy. It is further anticipated that annual sales would increase from a level of $427k to $686k as a result of the change in the cash discount policy. The average inventory carried by the firm is based on an EOQ. Assume sales increase from 16k to 21.3k units. The ordering cost for each order is $200 and the carrying cost per unit is $1.82 – these values will not change with the discount. Each unit in inventory has an average cost of $11. Cost of goods sold equates to 69% of net sales, general and administrative expenses are 16% of net sales, and interest payments of 14% will only be necessary for the increase in the accounts receivable and inventory balances*(see information below). Taxes will be 36% of before-tax income. Note: The term “k” is used to represent thousands (× $1,000).

Required: Calculate the percentage in earnings after taxes (EAT) between the current policy (before the discount) and the new policy (after the discount).

John’s Custom Computer Shop (JCCS) assembles computers for both individual and corporate customers. The company is organized into two divisions: Personal and Business. Once a computer is built, it is shipped to the customer. Billing for all customers is handled by the corporate Accounts Receivable Department. Accounts Receivable performs two major activities: billing and dispute resolution. Billing refers to preparing and sending the bills as well as processing the payments. Dispute resolution occurs when a customer refuses to pay, usually due to an error in billing.

The costs of the Accounts Receivable Department are allocated to the two divisions based on the number of bills prepared. Kyle, the manager of the Business division, has complained that the allocated costs from Accounts Receivable are beginning to make the business division look unprofitable and has asked you to recommend some changes to the allocation system. If he agrees with your recommendation, he will pass them on to the chief financial officer.

Data on costs and activities in the Accounts Receivable Department follow.

The Accounts Receivable Department incurred the following costs during the year.

Required:

a. Under the current allocation system, what is the cost that will be allocated from Accounts Receivable to Personal? To Business?

b. Suppose the company implements an activity-based cost system for Accounts Receivable with two activities, billing and dispute resolution. What is the cost that will be allocated from Accounts Receivable to Personal? To Business? Use the number of bills prepared as the cost driver for billing costs and the number of disputes for dispute resolution costs.

Under the current allocation system, what is the cost that will be allocated from Accounts Receivable to Personal? To Business? (Do not round intermediate calculations.)

Suppose the company implements an activity-based cost system for Accounts Receivable with two activities, billing and dispute resolution. What is the cost that will be allocated from Accounts Receivable to Personal? To Business? Use the number of bills prepared as the cost driver for billing costs and the number of disputes for dispute resolution costs.

Jan rents cars and small vans to individual and business customers. The company has twelve branches located in large towns spread across Jan’s home country.

Each of Jan’s branches has its own computer network which stores details of all vehicles located at the branch, advanced bookings and current rentals. The only paper records held at branches are the signed rental agreements. Everything else is held electronically. Each branch has several PCs that are linked to a branch server where all of the files are stored. The files on each branch server are backed up to the head office computer system after the close of business every evening.

Customers can book rentals in advance by telephoning their local branch or by logging onto the branch web page. Customers details are initially collected on the branch network but all details including verification of identity and driver’s licence are checked when the customer collects the car. Details of the vehicle, including any dents or scrapes on the bodywork or minor mechanical defects, are printed on the rental agreement form and the member of staff and the customer check the vehicle together before the customer signs the agreement.

The branch network keeps track of all vehicles that are supposed to be returned each day. If a vehicle is overdue without good reason then the police are informed that the vehicle has been stolen.

All returned vehicles are checked for damage that was not listed on the rental agreement. Customers have to pay for any damage that occurred while the vehicle was in their possession.

The manager in charge of Jan’s information systems (IS) at the company’s head office has been asked to investigate two potential problems that occurred at the South town branch. A member of the IS team visited the branch in order to carry out some routine maintenance and discovered the following:

• The Branch Manager had a notebook computer plugged into the branch network. The manager explained that the notebook computer was his own personal property. 3 He found it useful to copy branch files so that he could work on writing his monthly management reports at home.

• One of the PCs in the branch was not the standard model used throughout Jan’s. The branch manager explained that there were never sufficient PCs in the branch and so he had used part of the branch equipment budget to purchase an inexpensive PC from a local computer store. The inexpensive PC came equipped with the latest version of a standard operating system. The PCs communicate with the branch network using a specially written program. The branch staff loaded a copy of that program from a CD that had been left behind by a member of the head office IS team during an earlier visit.

Jan’s system uses an older version of the standard operating system and the branch network software installed on the PC was not the latest version, although the Branch Manager insisted that the PC worked perfectly. It has also been useful because the other PCs in the branch were not fitted with optical drives (i.e. they cannot read CDs or DVDs) and he has found it useful to be able to use this machine to install software to other machines over the branch network in order to enhance efficiency.

Required (Please note that the answer should be detailed)

(a) Advise the branch manager on the importance of adequate information systems (IS) for Jan’s.

Your answer to part (a) should NOT discuss the specific matters identified by the member of the IS team during the branch visit.

(b) Evaluate the control implications of each of the matters discovered by the member of the IS team.