Identify and describe the three tools of financial statement

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Reference no: EM13817747

1) 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.

2)You recently received a letter from your Uncle Frank. A portion of the letter is presented below. You know that I have a significant amount of money I saved over the years. I am thinking about starting an investment program. I want to do the investing myself, based on my own research and analysis of financial statements. I know that you are studying accounting, so I have a couple of questions for you. I have heard that different users of financial statements are interested in different characteristics of companies. Is this true, and, if so, why? Also, some of my friends, who are already investing, have told me that comparisons involving a company’s financial data can be made on a number of different bases. Can you explain these bases to me? Instructions List your answers to his questions

3) Drew Carey Corporation reported the following amounts in 2007, 2008, and 2009. 2007 2008 2009 Current assets $200,000 $230,000 $240,000 Current liabilities $160,000 $168,000 $184,000 Total assets $500,000 $600,000 $620,000

(a) Identify and describe the three tools of financial statement analysis.

(b) Perform each of the three types of analysis on Drew Carey’s current assets.

4) The following data are taken from the financial statements of Morino Company. 2009 2008 Accounts receivable (net), end of year $ 550,000 $ 520,000 Net sales on account 3,960,000 3,100,000 Terms for all sales are 1/10, n/60. (a) Compute for each year (1) the receivables turnover and (2) the average collection period.At the end of 2007, accounts receivable (net) was $480,000. (b) What conclusions about the management of accounts receivable can be drawn from these data?

Reference no: EM13817747

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