...Case Study 2 FI504 Accounting and Finance for Managerial Use and Analysis Recommendations for LJB Company: Requirements for Going Public: A requirement of all publicly traded companies is to comply with the Sarbanes-Oxley Act of 2002. This means that LJB would be required to maintain a system of internal control. The controls must be reliable and effective, which the executives and Board of Directors must monitor. Also, an outside auditor must confirm that the control systems are sufficient. Although there will be additional work on both designing, testing and auditing of controls if LBJ decides to go public, but the control system may result in money and time saved in the long-term regardless. Good practices: LJB Company currently has some good practices I suggest they continue. The use of pre-numbered invoices allows for missing or undocumented invoices to be caught quickly. This practice is considered a documentation procedure under internal controls. Having two managers approve new hires helps ensure a good fit. It’s good that the accountant completes bank reconciliation. While using a bank is a form of control for cash, the reconciliation enables LJB to make sure there are no errors between what the bank and what they have on the books. Areas of Improvement: There are a number of practices by LJB that don’t deter fraud and would need to be changed before considering going public. Segregation of duties: The duties for handling assets...
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...Evaluation of Internal Controls Mr. Smith, We have completed our assessment of LBJ Company’s system of internal controls. In addition, our firm researched the regulation regarding publicly traded firms in order to provide you with the most current information. Securities and Exchange Commission. “Official U.S. Agency Web Site.” Web. 24 September 24, 2011. Publicly traded corporations are required to implement the guidelines of the Sarbanes-Oxley Act of 2002. This means that publicly traded companies must include a management report on the internal controls of the company. The annual report must include an attestation report from a registered public accounting firm. The executive officers and the board of directors Wilson 2 of LBJ Company are responsible for implementing and maintaining effective internal controls. Furthermore, the executive officers and board of directors of publicly traded companies must attest to the adequacy of the internal controls of the company. Failure to comply with the standards of SOX subjects LBJ Company, along with the executive officers and board of directors to severe penalties of fines and imprisonment. The five principles of internal control are the following: * Establishment of Responsibility * Segregation of Duties * Documentation Procedures * Physical Controls * Independent Internal Verification * Human Resource Controls The accountant’s decision to start using pre-numbered invoices is an important...
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...Home Page» Business and Management Fi504 Practice Case Study 2 Internal Controls In: Business and Management Fi504 Practice Case Study 2 Internal Controls SUBJECT: Evaluation of Internal Controls Mr. Smith, We have completed our assessment of LBJ Company’s system of internal controls. In addition, our firm researched the regulation regarding publicly traded firms in order to provide you with the most current information. Securities and Exchange Commission. “Official U.S. Agency Web Site.” Web. 24 September 24, 2011. Publicly traded corporations are required to implement the guidelines of the Sarbanes-Oxley Act of 2002. This means that publicly traded companies must include a management report on the internal controls of the company. The annual report must include an attestation report from a registered public accounting firm. The executive officers and the board of directors Wilson 2of LBJ Company are responsible for implementing and maintaining effective internal controls. Furthermore, the executive officers and board of directors of publicly traded companies must attest to the adequacy of the internal controls of the company. Failure to comply with the standards of SOX subjects LBJ Company, along with the executive officers and board of directors to severe penalties of fines and imprisonment. The five principles of internal control are the following: * Establishment of Responsibility * Segregation of Duties * Documentation...
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...FI504 Case Study 3 on Cash Budgeting The cash budget was covered during Week 4 when we covered TCO D and you read Chapter 7. There is also a practice case study to work on. Your Professor will provide the solution to the practice case study at the end of Week 5. This case study should be uploaded by 11:59PM Mountain time of the Sunday ending Week 6 to the Week 6 Assignment Dropbox. You are encouraged to use the Excel template file provided in Doc Sharing. The Oxford Company has budgeted sales revenues as follows: July August September Credit sales $30,000 $24,000 $18,000 Cash sales 18,000 51,000 39,000 Total sales $48,000 $75,000 $57,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are $65,000 in July, $45,000 in August, and $21,000 in September. Other budgeted cash receipts: (a) sale of plant assets for $12,350 in August, and (b) sale of new common stock for $16,850 in September. Other budgeted cash disbursements: (a) operating expenses of $6,750 each month, (b) selling and administrative expenses of $12,500 each month, (c) dividends of $19,000 will be paid in August, and (d) purchase of equipment for $6,000 cash in September. The company has a cash...
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...FI504 Case Study 3 on Cash Budgeting The cash budget was covered during Week 4 when we covered TCO D and you read Chapter 7. There is also a practice case study to work on. Your Professor will provide the solution to the practice case study at the end of Week 5. This case study should be uploaded by 11:59PM Mountain time of the Sunday ending Week 6 to the Week 6 Assignment Dropbox. You are encouraged to use the Excel template file provided in Doc Sharing. The Oxford Company has budgeted sales revenues as follows: July August September Credit sales $30,000 $24,000 $18,000 Cash sales 18,000 51,000 39,000 Total sales $48,000 $75,000 $57,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are $65,000 in July, $45,000 in August, and $21,000 in September. Other budgeted cash receipts: (a) sale of plant assets for $12,350 in August, and (b) sale of new common stock for $16,850 in September. Other budgeted cash disbursements: (a) operating expenses of $6,750 each month, (b) selling and administrative expenses of $12,500 each month, (c) dividends of $19,000 will be paid in August, and (d) purchase of equipment for $6,000 cash in September. The company has a cash balance of $10...
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...FI504 Case Study 3 on Cash Budgeting Requirements: 1. Use this information to prepare a Cash Budget for the months of August and September, using the template provided in Doc Sharing. Excel Spreadsheet 2. What are the three sections of a Cash Budget, and what is included in each section? The cash budget is separated into three sections: cash receipts, cash disbursements, and financing (Cenar, 2009). The first section, cash receipts, is exactly what the name implies, which is the cash expected to be received for goods or services rendered by the company. Because it is driven mostly by sales, cash is not just the physical dollar amounts being received by the company but also includes interest and dividends as well as planned sales of assets like stock or inventory or plant sales (Parry, 2006). The second section is cash disbursements, which just means payments for expenses that the company incurs to do business (DeThomas, 1980). Examples of these payments would be labor costs, raw materials cost, and income taxes (DeThomas, 1980). Anything that is used or will be used to maintain operations or production for the company would be put into this category of the cash budget. Finally, the financing section is where any money borrowed from investors, banks, and other financial sources can be located (Cenar, 2009). This section shows borrowing and repayment of that borrowed money, and is necessary to utilize as a guide against cash deficiency (Cenar, 2009)...
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...The FI504 Final Exam will be an online open-book, open-notes, open-computer exam with a time limit of three hours and 30 minutes. It will be worth 250 points or 25% of your course grade. The Final Exam is two pages long and will consist of 14 multiple-choice questions worth five points each and six essays worth 30 points. Some of the multiple-choice questions are problem-based. Of the six essays, five of the essays are problem-based since this is an Accounting course. Terminal Course Objectives A, B, C, D, E, F, and G are all addressed on this exam. You should review the following concepts for this exam. For the multiple choice questions worth a total of 70 points, you should know: 1. The characteristics of the corporate form of business. 2. About the term "cash dividend". 3. Which accounts have debit or credit balances. 4. The difference between cash-basis versus accrual-basis of accounting. 5. The meaning and implications of using FIFO, LIFO, and weighted average cost-flow assumptions. 6. How to calculate depreciation using the straight-line method. 7. The journal entry for the issuance of bonds (at par, discount, or premium) and for the issuance of stock (at par or above par). 8. How to determine the market value of a bond. 9. The various adjustments that are made to net income in arriving at net cash flow from operating activities. 10. The different tools of financial statement analysis, and how each tool is used, as well...
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...Week 1 Question 1 Welcome to our Week 1 Discussions! To get us started, let's consider the following questions. 1) Would a traditional income statement differ depending on whether the business is a service organization, merchandiser, or manufacturer? 2) Could we use managerial accounting tools to assess the profitability of an organization other than a manufacturing business, or are the topics that we are learning only related to manufacturing? 3) If we could use these concepts in service and/or merchandising businesses, how would we go about doing so? Let's start with the first question. According to Casteele (2013), income statements are important to most business. It allows owners, managers, and shareholders to see how money is flowing into the company. This article also stated that service and manufacturing companies have several differences between their statements since the businesses have different types of expenses and different income sources. The article further explains, businesses adapt their income statements to their needs based upon the industry the business is in. A business in the service industry could not use the same income statement template as manufacturing industry businesses, because of the significant differences in how the businesses operate and earn money. Casteele, J. (2013). The Difference Between Service and Manufacturing Income Statements. Retrieved from http://smallbusiness.chron.com/difference-between-service-manufacturing-income-statements-34551...
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