Kingston Cooperates in the computer games industry, developing new games for sale in retail stores. Portmore Co is currently waiting for confirmation from their bank that their overdraft facility will be extended. The bank have requested a copy of the audited financial statements as soon as they are available. Montego Co has recently started selling their products overseas. Lucea Co, a manufacturer, has negotiated a contract with a new supplier for all its raw materials.

Required: For each of the scenarios above identify the business risks and state the impact, this might have on your assessment of the risk of material misstatement for the planning of the audit.

The cash account for Brentwood Bike Co. at May 1, indicated a balance of $36,016. During May, the total cash deposited was $138,030, and checks written totaled $138,571. The bank statement indicated a balance of $43,940 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: A. Checks outstanding totaled $6,281. B. A deposit of $1,796 representing receipts of May 31, had been made too late to appear on the bank statement. C. The bank had collected for Brentwood Bike Co. $5,670 on a note left for collection. The face of the note was $5,400. D. A check for $570 returned with the statement had been incorrectly charged by the bank as $750. E. A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as $120. The check was for the payment of an obligation to Adkins Co. on account. F. Bank service charges for May amounted to $26. G. A check for $1,394 from Jennings Co. was returned by the bank due to insufficient funds. Instructions 1. Prepare a bank reconciliation as of May 31. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. 2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles. 3. If a balance sheet were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?

Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable. Selected transactions completed by Ditzler company are as follows:

Feb 1          Sold merchandise on account to Ames Co., $8000. The cost of the

merchandise sold was $4500

Mar. 15      Accepted a 60-day, 12% note for $8000 from Ames Co. on account

Apr. 9        Wrote off a $2500 account from Dorset Co. as uncollectible

Apr. 21       Loaned $7500 cash to Jill Klein, receiving a 90-day, 14% note

May 14       Received the interest due from Ames Co. and a new 90-day, 14% note

as a renewal of the loan. (Record both the debit and the credit to the

notes receivable account).

June 13       Reinstated the account of Dorset Co., written off on April 9, and

received $2500 in full Payment

July 20       Jill Klein dishonored her note

Aug. 12      Received from Ames Co. the amount due on its note of May 14

Aug 19       Received from Jill Klein the amount owed on the dishonored note,

plus interest for 30 day at 15% computed on the maturity value of the

note

Dec 16       Accepted a 60-day, 12% note for $12000 from Global company on

Account

Dec 31       It is estimated that 3% of the credit sales of $1,375,000 for the year

ended December 31 will be uncollectible

Instructions:

1. Journalize the transactions

2. Journalize the adjusting entry to record the accrued interest on December 31 on the Global Company note.

A 1980 study was conducted whose purpose was to compare the indoor air quality in offices
where smoking was permitted with that in offices where smoking was not permitted. Measurements were made
of carbon monoxide (CO) at 1:20 p.m. in 36 work areas where smoking was permitted and 36 work areas where
smoking was not permitted. In the sample where smoking was permitted, the mean CO = 11.6 parts per million
(ppm) and the standard deviation CO = 7.3 ppm. In the sample where smoking was not permitted, the mean CO
= 6.9 ppm and the standard deviation CO = 2.7 ppm. Test for whether or not the mean CO is significantly (α =
0.05) different in the two types of working environments.
(a) What is the null hypothesis for this problem? What is the alternative hypothesis?
(b) For this problem, would you perform a one- or two-tailed test? Explain how you reached that decision.
(c) Determine which procedure (you have learned five situations) is the appropriate statistical test to use, with
a clear explanation for your choice.
(d) Using your calculator, test the null hypothesis and present your results. Show all your work.
(e) Using statistical language (“statistic-ese”), state your conclusion and your reasoning for reaching this
conclusion. Then restate your conclusion, this time in English instead of “statistic-ese,” without including
statistical symbols or the term hypothesis. (What is the answer to the researcher’s question?)
(f) State, based on your conclusion, whether you may have committed a Type I error or a Type II error, and
what that means.

Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable. Selected transactions completed by Ditzler company are as follows:

Feb 1          Sold merchandise on account to Ames Co., $8000. The cost of the

merchandise sold was $4500

Mar. 15      Accepted a 60-day, 12% note for $8000 from Ames Co. on account

Apr. 9        Wrote off a $2500 account from Dorset Co. as uncollectible

Apr. 21       Loaned $7500 cash to Jill Klein, receiving a 90-day, 14% note

May 14       Received the interest due from Ames Co. and a new 90-day, 14% note

as a renewal of the loan. (Record both the debit and the credit to the

notes receivable account).

June 13       Reinstated the account of Dorset Co., written off on April 9, and

received $2500 in full Payment

July 20       Jill Klein dishonored her note

Aug. 12      Received from Ames Co. the amount due on its note of May 14

Aug 19       Received from Jill Klein the amount owed on the dishonored note,

plus interest for 30 day at 15% computed on the maturity value of the

note

Dec 16       Accepted a 60-day, 12% note for $12000 from Global company on

Account

Dec 31       It is estimated that 3% of the credit sales of $1,375,000 for the year

ended December 31 will be uncollectible

Instructions:

1. Journalize the transactions

2. Journalize the adjusting entry to record the accrued interest on December 31 on the Global Company note.

Journalize the entries for the following transactions. Refer to the Chart of Accounts for exact wording of account titles. (Note: The company uses a clearinghouse to take care of all bank as well as non-bank credit cards used by its customers. )

CHART OF ACCOUNTSGeneral Ledger

Journalize the entries for the transactions on December 31. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

The following selected transactions were completed by Betz Company during July of the current year. Betz Company uses the net method under a perpetual inventory system.

Journalize the entries to record the transactions of Betz Company for July. Refer to the Chart of Accounts for exact wording of account titles.

Chart of Accounts

Journal

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Journalize the entries to record the transactions of Betz Company for July. Refer to the Chart of Accounts for exact wording of account titles.

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PAGE 10

JOURNAL

ACCOUNTING EQUATION

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Points:

51.23 / 60

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Journalize these transactions from the buyer's perspective. Discounts are taken on the amount owed to the seller, except for any freight costs.

July 1, 3, 5, 19 & 20: Using the perpetual inventory system, purchases of inventory on account are recorded by debiting the merchandise inventory account and crediting the accounts payable account. Under FOB shipping point, freight is paid by the buyer, while FOB destination freight is the seller's expense. Often freight must be prepaid for the carrier to deliver.

July 6: Any discounts or returns are recorded directly by the buyer who debits Accounts Payable and credits Merchandise Inventory, basically reversing what was done in recording the purchase.

July 13: Since the invoice is paid within the discount period, the cash paid on account is the difference between the invoice and the discount.

July 14: Returns are not eligible for discounts. Since the invoice is paid within the discount period, Accounts Payable is debited for the balance in the account. The cash paid on account is the difference between the invoice and the discount, less the returns.

July 19: Freight expense increases the cost of the merchandise. However, freight is typically prepaid in cash.

July 30: Since the invoice is paid within the discount period, the cash paid on account is the difference between the invoice and the discount.

July 31: Since no discounts are allowed, no discounts are recorded. The cash paid on account in each case is equal to the invoice.