Midterm Form B Solutions - Midterm SP 2010 B Key 1 8/26th...

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Midterm SP 2010 B Key 1. 8/26th : Hawthorne Manufacturing (the "buyer") places an order to purchase materials from High Quality Vendor ("HQV"). The materials normally list for $20,000 but due to Hawthorne's buying history the vendor gave them a 10% trade discount and the standard payment terms of 2/10, n/30 Hawthorne anticipates selling the items for $25,000. 8/28th: The materials are shipped FOB Shipping point from HQV's warehouse in California with $1,000 of freight prepaid. 9/5th: The materials arrive at Hawthorne's facility. Upon inspection of the goods, half of the order is sent back & not accepted. 9/12th: Hawthorne pays the vendor the amount owed. How much cash will Hawthorne need to pay the seller in order to settle the account payable in full? A. $10,000 B. $18,000 C. $9,820 D. $9,000 E. $8,820 2. Magazine Corporation has a company policy that any single check written that is greater than $5,000 requires two separate signatures. Stephen Mill, the controller, is one of the two individuals with authorization to sign checks. The second individual is the Treasurer, Susan Davis. Susan travels frequently for business and it is therefore hard to track her down to obtain her signature. On one particular day, Stephen realizes that there is a $9,000 vendor invoice that needs to be paid immediately or the company risks losing their 1% purchase discount. To side step the dual signature requirement, Stephen requests that two $4,500 checks be prepared instead of a single $9,000 check. Which of the following statements is true? A. Stephen's employees may mirror his attitudes and actions (i.e. while performing their own jobs). Because of this fact, his decision weakened the overall control environment. B. Stephen's behavior strengthened the company's control environment as he was able to make a decision on the fly and save the company money. C. Stephen's decision has no impact on the company's overall control environment. It impacted the execution of a single control procedure (i.e. dual signatures) and nothing else. D. Stephen's employees may mirror his attitudes and actions (i.e. while performing their own jobs). Because of this fact, his decision strengthened the overall control environment. E. Since Stephen did not create the policy, he was really left with no choice in the matter, but to do what he did.
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3. The Kwok Company’s inventory balance on December 31, 2006, was $100,000 (based on a 12/31/06 physical count) before considering the following transactions: 1. Goods shipped to Kwok f.o.b. destination on December 20, 2006, were received on January 4, 2007. The invoice cost was $25,000. 2. Goods shipped from Kwok to a customer f.o.b. destination on December 26, 2006, were received by the customer on December 30, 2006. The sales price was $35,000 and the merchandise cost $25,000. 3.
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Midterm Form B Solutions - Midterm SP 2010 B Key 1 8/26th...

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