E8-5 Listed below are five procedures followed by The Beat

E8-5 Listed below are five procedures followed by The Beat Company.
1. Several individuals operate the cash register using the same register drawer.
2. A monthly bank reconciliation is prepared by someone who has no other cash responsibilities.
3. Ellen May writes checks and also records cash payment journal entries.
4. One individual orders inventory, while a different individual authorizes payments.
5. Unnumbered sales invoices from credit sales are forwarded to the accounting department
every four weeks for recording.
Instructions
Indicate whether each procedure is an example of good internal control or of weak internal control.
If it is an example of good internal control, indicate which internal control principle is being
followed. If it is an example of weak internal control, indicate which internal control principle is
violated. Use the table below.
Procedure IC Good or Weak? Related Internal Control Principle
1.
2.
3.
4.
5.



E15-11 Scully Corporation’s comparative balance sheets are presented below.
SCULLY CORPORATION
Balance Sheets
December 31
2008 2007
Cash $ 4,300 $ 3,700
Accounts receivable 21,200 23,400
Inventory 10,000 7,000
Land 20,000 26,000
Building 70,000 70,000
Accumulated depreciation (15,000) (10,000)
Total $110,500 $120,100
Accounts payable $ 12,370 $ 31,100
Common stock 75,000 69,000
Retained earnings 23,130 20,000
Total $110,500 $120,100
Scully’s 2008 income statement included net sales of $100,000, cost of goods sold of $60,000, and
net income of $15,000.
Instructions
Compute the following ratios for 2008.
(a) Current ratio.
(b) Acid-test ratio.
(c) Receivables turnover.
(d) Inventory turnover.
(e) Profit margin.
(f) Asset turnover.
(g) Return on assets.
(h) Return on common stockholders’ equity.
(i) Debt to total assets ratio.

Submitted: 1124 days and 4 hours ago.

Category: Homework

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