...APPLIANCE COMPANY PROBLEM In 1989, Auditors of Wrencroft Appliance Company (WAC) proposed two different inventory write-downs regarding a discontinued microwave product and spare parts to the company’s audit committee. John Moore, WPC‘s CFO, is in the position to make recommendations to the board regarding the proposed adjustments. He needs to make a careful evaluation of whether the proposed inventory write-downs are necessary for the independent accountants to render unqualified opinion. In order to make sound recommendations to audit committee, John should analyze on the following matters. 1.) Are the reflected amounts in the proposed write-downs based on reasonable estimates? 2.) Is there a sufficient evidence for either write-downs to justify corresponding tax deductions? ANALYSIS Inventory valuation & Estimates for proposed write-downs Discontinued Microwave WPC’s auditor used Lower of Cost or Market (LCM) method as basis for inventory valuation in the proposal given. The discontinued microwave oven was proposed to be adjusted to 40% of the finished goods inventory of 1988 due to the anticipation of selling the units to a large discount chain with an agreement to receive 40% of the cost of the microwaves, while the spare parts manufactured for the microwaves should be disposed of at 5% scrap value. The necessity to write down this bulk of inventory favors tax deduction for the company’s advantage. However the case did not imply that there is an evident...
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...INTRODUCTION 1.1 Background Successful inventory management involves crating a purchasing plan that will ensure that items are available when they are needed but that neither too much nor too little is purchased and keeping track of existing inventory and its use. Two common inventory management strategies are the just -in-time method, where companies plan to receive items as they are need rather than maintaining high inventory levels, and materials requirement planning, which schedules material deliveries based on sales forecasts. An inventory valuation allows a company to provide a monetary value for items that make up their inventory. Inventories are usually the largest current asset of a business, and proper measurement of them is necessary to assure accurate financial statements. If inventory is not properly measured, expenses and revenues cannot be properly matched and a company could make poor business decisions. The two most widely used inventory accounting systems are the periodic and the perpetual. * Perpetual: The perpetual inventory system requires accounting records to show the amount of inventory on hand at all times. It maintains a separate account in the subsidiary ledger for each good in stock, and the account is updated each time a quantity is added or taken out. The perpetual system records revenue each time a sale is made. Determining the cost of goods sold requires taking inventory. The most commonly used inventory valuation methods under a periodic system...
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...Course Syllabus School of Business XACC/290 Version 1 Principles of Accounting I Copyright © 2013 by University of Phoenix. All rights reserved. Course Description This course covers the fundamentals of financial accounting as well as the identification, measurement, and reporting of the financial effects of economic events on an enterprise. Students will learn to examine financial information from the perspective of management. Other topics include decision-making, planning, and controlling from the perspective of a practicing manager. Policies Faculty and students will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged into the student website to view this document. • Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning of each class. Policies may be slightly different depending on the modality in which you attend class. If you have recently changed modalities, read the policies governing your current class modality. Course Materials Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (6th ed.). Hoboken, NJ: John Wiley & Sons. All electronic materials are available on the student website. Week One: Basic Accounting Principles and Concepts Details Due Points Objectives...
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...and earnings per share to name a few. All calculations can be found in the appendices. Results of data analysed show that all ratios are below industry averages. In particular, comparative performance is poor in the areas of profit margins, liquidity, credit control, and inventory management. The report finds the prospects of the company in its current position are not positive. The major areas of weakness require further investigation and remedial action by management. Recommendations discussed include: key-bullet improving the average collection period for accounts receivable· key-bullet improving/increasing inventory turnover· key-bullet reducing prepayments and perhaps increasing inventory levels The report also investigates the fact that the analysis conducted has limitations. Some of the limitations include: forecasting figures are not provided nature and type of company is not known nor the current economic conditions data limitations as not enough information is provided or enough detail i.e. monthly details not known results are based on past performances not present Excerpt from Woodward-Kron, R. (1997) Writing in Commerce: a guide to assist Commerce students with assignment writing, (Revised edition), Centre for the Advancement of Teaching and Learning, The University of...
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...Ethics Writing Sharon Black Kaplan University Abstract Many businesses that have had a good year very often pay some of their bills ahead, ie utilities, rent, etc that would have been paid in the new year but have the bills on hand and increasing the inventory will adjust the cost of goods of the current year which could result in a change in the taxable income for the current year. If you maintain an inventory you do not expense it as you purchase it, buying ahead would only affect your inventory on hand and your cost of goods. The LIFO accounting method for a business’s inventory (standing for last in, first out) has come under fire from Congress and the White House Sometime in 2012 President Obama recommended repealing this accounting method, saying it was a way for businesses to qualify for significant tax breaks during inflationary times, cutting down on the amount of money and that they then pay to the federal government. The government prefers hat businesses instead follow the inventory accounting method of first in, first out, or FIFO. Upon reviewing the provided information given, he has instructed them to make a large purchase of inventory for delivery 3 days before the end of the year. They are doing that to lower the income, which I don’t think this is ethical. I don’t think that R.J. would have given the same directive if they would have been using the FIFO method. The US Treasury Department, is calling for a repeal of LIFO, says that the accounting method...
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...Introduction My role at Smackey Dog Food is to apply the audit procedures and objectives to this company. A cursory examination reveals that there are many areas where Smackey's accounting practices can be improved. At times, there are faults with the techniques that are being used. At other times, there are faults just as much with the control systems. Inadequate control systems are often the cause of problems with a company's accounting practices, and ensuring that proper controls are in place is one of the most important roles of the auditor (CSU, 2009). In this analysis, the issues will be taken one at a time, and then some final overarching recommendations will be made to ensure that not only are these problems addressed but that systems are in place to ensure that there are no further problems. Problem #1 – Waste and Margins The one-serving packages that are freshly manufactured are sold at three times the price of their other products. Waste is an issue for this product, in part because of the necessity of using fresh ingredients. From a business perspective, Smackey can set its prices at whatever level it feels is appropriate for the market, but the company should have a sense of whether or not this product is making money. Thus, the company must be able to measure this waste in order to ensure that it makes money on this product. High waste is a symptom of poor controls. A management accounting system is recommended, for example contribution margin...
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...the appendices. Results of data analysed show that all ratios are below industry averages. In particular, comparative performance is poor in the areas of profit margins, liquidity, credit control, and inventory management. The report finds the prospects of the company in its current position are not positive. The major areas of weakness require further investigation and remedial action by management.Recommendations discussed include: improving the average collection period for accounts receivable· improving/increasing inventory turnover· reducing prepayments and perhaps increasing inventory levels The report also investigates the fact that the analysis conducted has limitations. Some of the limitations include: forecasting figures are not provided nature and type of company is not known nor the current economic conditions data limitations as not enough information is provided or enough detail i.e. monthly details not known results are based on past performances not present | subject matter methods of analysis Findings Conclusions Recommendations (note that conclusions and recommendations can be bulleted) Limitations of the report. | Excerpt from Woodward-Kron, R. (1997) Writing in Commerce: a guide to assist Commerce students with assignment writing, (Revised...
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...ACCOUNTING STANDARD-2: ACCOUNTING STANDARD -2 VALUATION OF INVENTORIES PURPOSE: PURPOSE Specifies the principals for valuing the inventory. Disclosure of the specific policies adopted by the management for the valuation of inventory. SCOPE: SCOPE This statement should be applied in accounting for inventories other than : Work in progress arising under construction contracts, including directly related service contracts. Work in progress arising in the ordinary course of business of service providers. Shares, debentures and other financial instruments held as stock-in-trade; And. Producers’ inventories of livestock, agricultural and forest products, and mineral oils, ores and gases to that extent that they are measured at net realisable value in accordance with well established practices in those industries. RELEVANT DEFINITIONS: RELEVANT DEFINITIONS Inventories are assets : held for sale in the ordinary course of business. in the process of production for such sale. in the form of materials or supplies to be consumed in the production process or in the rendering of services. Net Realisable Value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated cost necessary to make the sale. VALUATION: VALUATION Inventories should be valued at the lower of Cost and Net Realisable Value . The Practice of writing down inventories below cost to Net Realisable Value is consistent with the view that assets...
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...provide efficiencies within manufacturing, the DCs and sales to enhance the successful unique business model. ISSUE IDENTIFICATION The following are a list of issues/problems that must be addressed: • DOS system is no longer supported by Microsoft • In-house applications created by vendor • Writing applications versus buying applications • Transparency between stores • Order processing time • No formal IT process for setting budget or deciding on specific technology, investments or projects • Store managers scope of responsibility is high versus no discretion for store layout • No performance measures • No forecasting, buy and respond “on the fly” • Not high end fashion • High capital costs for DCs, manufacturing, and factories • Small batch production ENVIRONMENTAL AND ROOT CAUSE ANALYSIS 1. DOS system is no longer supported by Microsoft since 2003. Zara chooses to write all their applications in house. This matches the philosophy for speed and decentralized decision making to ensure a stable, effective and easy roll out to each store and maintain. To support their in-house application writing process the IS department consists of 50 people and entails three groups – Store solutions, Logistics support, and Administrative systems. Commercial applications have to be extensively modified to accommodate the unique operation Zara...
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...MARKETING I PRE-FINALS QUIZ #2 MWF 11:30-12:30 I. Fill in the blanks. Physical distribution is that marketing ____________ which facilitates the ____________ of goods from the ____________ to the ____________ of the ____________. On a broader scope, physical distribution includes the ____________ of ______________, ______________, and _____________ to the firm's ______________________. II. Matching type. Match Set A with Set B by writing the corresponding letter of the answer on the space provided before each number. SET A ___1. A means of transportation which is considered as less costly. ___2.A widely used inventory control technique. ___3. A special transport agency which fit the requirement for speed and reliability. ___4. This refers to receiving, recording, filling, and assembling orders for shipment. ___5. An inventory which may mean lost sales. ___6. A type of warehouse which are owned or leased by the company. ___7. This form of transportation constitutes the fastest means of delivering goods. ___8. This refers to the activities involved in moving goods over short distances into, within, and out of warehouses and manufacturing plants. ___9. A component of the order cycle that refers to the time the customer develops the order until the order is received by the seller. ___10. A form of transportation which provides a very important means of transportation especially in an archipelago like the Philippines. ___11. This cycle...
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...1. Draw a system diagram showing the product and information flows between WGD and FastFit, starting with FastFit placement of an order through when it makes payment for goods received. 2. Receive sa an order 2. Receive sa an order 1. Makes an order 1. Makes an order WGD WGD 3. Sends FastFit an invoice for the order 3. Sends FastFit an invoice for the order FastFit FastFit 4. Sends order details( finalized shipping information) 4. Sends order details( finalized shipping information) 5. Ships the item 5. Ships the item 6. Receives Product 6. Receives Product 7. Eventually pays WGD for the product( Normally pays for multiple orders at once) 7. Eventually pays WGD for the product( Normally pays for multiple orders at once) 8. Accounting department: Collect payments 8. Accounting department: Collect payments 9. Ask for return for some product 9. Ask for return for some product 10. Come into agreement and pay back the return 10. Come into agreement and pay back the return 2. Complete a more detailed diagram that has five distinct processes, two for FastFit (Headquarters and the Warehouse) and three for WGD’s three departments. This diagram should also include the database associated with each WGD department using the cylinder symbol, there are three of these. Now fill in the flows from Q1 above. Then diagram all the flows of information that occur within FastFit and within WGD to support the processing of the order...
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... Lahore. The crux of the business is to buy lighting products from Chinese supplier situated in China and sell them through the retailing shop in Lahore, Pakistan. The business has recently expanded and another outlet has been opened in DHA, Lahore. However, due to problems in inventory management of the first shop, the inauguration of the second shop has been delayed. Workforce of Butt Lights: Title | Job Description | 1 Outlet Manager | * Receives the customer and acknowledges their purchase. * Supervise the shop workers. | 2 Shop Workers | * Help the customers look around the displayed lights. * Run to-and-from errands of outlet and warehouse. | 1 Warehouse Worker | * Receives the stock from supplier * Makes the manual receipt. * Retrieves products from inventory for customer. | Warehouse Manager | * Updates and maintains inventory records. * Supervise the warehouse worker. | Project Scope and Problem Statement The project’s scope is extended to one current shop of Butt Lights. However, the proposed automated system for inventory management can be applied to any manufacturing and retailing business. Following are the prevailing problems in Butt Light’s Inventory Management: * When the stock is received from the supplier, the transaction is not recorded in a proper standardized receipt. Instead, the “number of products” and “product category” is manually written on a piece of paper by the Warehouse Worker. Often the receipt is lost...
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...essay on the importance and challenges of minimizing working capital. Your paper should be 4–6 pages in length and include three outside references. Your writing should be well organized and clear. Writing structure, spelling, and grammar should be correct as well. How to improve better performance of Working Capital Management Read more: http://www.ukessays.com/essays/finance/how-to-improve-better-performance-of-working-capital-management-finance-essay.php#ixzz2E8PrJWkr http://www.studymode.com/essays/Working-Capital-408723.html http://blog.accountingcpd.net/2012/08/16/working-capital-optimisation-in-smes-part-iii/ http://www.termpaperwarehouse.com/essay-on/Working-Capital/53803 * http://www.termpaperwarehouse.com/essay-on/Minimizing-Working-Capital/30029 * http://www.ing-wholesalebanking.com/insights/assets/pdf/research/1482.pdf * http://smallbusiness.chron.com/effect-revenue-increase-working-capital-42574.html * Working Capital * In business accounting, working capital is a benchmark measure of your company's ability to meet its short-term obligations. It's calculated by taking your business' current assets and subtracting its current liabilities. Current assets are those that can or will be converted to cash in the next year. The major current assets are cash, accounts receivable and inventory. Current liabilities are obligations that must be fulfilled within the next year. For a typical company, the major current liabilities are accounts payable...
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...manufacturing organizations. Purchase processing procedures Purchases procedures include the tasks involved in identifying inventory needs, placing the order, receiving the inventory and recognizing the liability. In general, these procedures apply to both manufacturing and retailing firms. It differs only in the way purchases are authorized. | Manufacturing firms | Merchandising firms | Purchase authorization | Production planning and control function | Inventory control function | Monitor inventory records The inventory control monitors and records finished goods inventory levels, when inventories drop to a predetermined reorder point, a purchase requisition is prepared and sent to the prepare purchase order function to initiate the purchase process. Prepare purchase order The prepare purchase order function receives the purchase requisitions, which are sorted by vendor if necessary. Next, a purchase order (PO) is prepared for each vendor. A copy of the PO is sent to the vendor. In addition, a copy sent to the set up of accounts payable (AP) function for filing temporarily in the AP pending file and a blind copy is sent to the receive goods function, where it is held until the inventories arrive. The last copy is filed in the open/closed purchase order file. Receive Goods The next event in the expenditure cycle is the receipt of the inventory. Goods arriving from the vendor are reconciled with the blind copy of the PO. Blind copy contains no quantity or price information...
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...ACCOUNTING FINAL EXAM PREP Assets : Manufacturing Inventory (p. 370) 1) Draw T-accounts for Raw Materials, Work in Process, Finished Goods, Cost of Goods Sold, A/P 2) Assign accounts to the questions 3) Enter beginning and ending balances on debit side: RM, WIP, F/G, and credit side: A/P 4) For COGS: use formula: Beginning Inventory + Purchases – Ending Inventories = COGS (alternatively) COGS – Beginning Inventory + Ending Inventories = Purchases 5) If COGS is given, you can solve for Purchases, will become Raw Materials 6) If an initial assumption is given that anything else is debited from the WIP like “purchasing” labor (it is already included in COGS and must be subtracted from what you found for purchases). 7) That difference will be debited into Raw Materials and credited into Accounts Payable 8) When writing journal entries, go in this order: a) Purchases (from formula) b) Purchases (w/any stipulations) to A/P* b) Raw Materials Purchased c) Raw Materials to WIP d) WIP to Finished Goods e) Accounts Payable to Cash *All purchases of Raw Materials must be made on account for this to work 9) At the end of balancing these COGS accounts, pay off A/P with Cash (if stated in her assumptions for account activity) Assets : Accounts Receivable 1) Assign accounts to the questions 2) Draw T-accounts for A/R (or Trade A/R) and Allowance for Doubtful Accounts 3) All write-offs are credited from A/R and debited...
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