Acct 101 Assignment 3 Due Date: December 6

Acct 101assignment 3last Due Date For Submission 6 December 2017the As

The assignment instructions require students to answer all questions related to accounting topics, including bank reconciliation statements, uncollectible accounts receivable methods, depreciation methods, audit procedures, risk assessment of intangible assets, analytical procedures in auditing various accounts, and survey analysis. Students must include personal details, adhere to formatting guidelines, avoid plagiarism, and submit via Blackboard by the specified deadline.

Paper For Above instruction

Accounting is a vital discipline in ensuring the financial integrity and operational transparency of any organization. This paper addresses key concepts such as bank reconciliation, accounting for uncollectible debts, depreciation, audit procedures, and analytical techniques vital in contemporary accounting practices.

Importance of Bank Reconciliation Statement and Items Causing Differences

The bank reconciliation statement (BRS) holds critical importance in accounting as it ensures the accuracy of financial records by reconciling the company's cash accounts with bank statements. It helps identify errors, omissions, or fraudulent activities promptly, thereby maintaining the integrity of financial data. For example, differences between the cash balance in the general ledger and the bank statement can be caused by bank errors, outstanding checks, deposits in transit, or bank fees unrecorded by the company. These items can lead to discrepancies that need resolution to reflect the true cash position of the organization.

Methods for Accounting for Uncollectible Accounts

The direct write-off method involves recognizing bad debt expenses only when specific accounts are deemed uncollectible. For instance, when a customer's account is overdue beyond a certain period and collection is unlikely, the company writes off that amount directly as an expense. Conversely, the allowance method estimates uncollectible accounts at the end of each accounting period, creating a provision (allowance for doubtful accounts) that offsets accounts receivable. This method aligns with the matching principle and provides a more accurate picture of receivables. For example, if estimated uncollectible receivables amount to $5,000, the company records an allowance of that amount, which is adjusted based on ongoing assessments.

Definition and Methods of Depreciation

Depreciation is the process of allocating the cost of a tangible asset over its useful life to match expense recognition with revenue generation. Common methods include:

• Straight-line method: Divides the cost evenly over the asset’s useful life. For example, a $10,000 asset with a 5-year useful life depreciates $2,000 annually.
• Declining balance method: Applies a fixed rate to the declining book value, resulting in higher depreciation expense in early years. For instance, with a 20% rate, the first year's depreciation on a $10,000 asset is $2,000.
• Units of production method: Depreciation based on actual usage or output. For example, if an asset is expected to produce 100,000 units, and 20,000 units are produced in a year, depreciation expense would be 20% of the total cost.

Audit Observations and Procedures for Physical Inventory Count

When performing an audit, an auditor should observe the physical inventory count to verify existence, accuracy, and completeness. Procedures include ticking the inventory items as they are counted to prevent double counting and reconciling counts with inventory records. For example, auditors may perform test counts at random locations, compare results with inventory logs, and examine documentation of inventory movements. This ensures physical counts are reliable and aligned with accounting records.

Inherent Risks in Assessing Intangible Assets

Assessing risks of intangible assets involves inherent uncertainties such as valuation difficulties, obsolescence, legal disputes, and impairment risks. For example, determining the fair value of patents or trademarks may rely on assumptions about future cash flows, which are inherently uncertain. Additionally, the risk of overstatement exists if companies capitalize costs improperly or fail to recognize impairment when assets lose value. Therefore, auditors must critically evaluate valuation methods, legal protections, and impairment testing procedures to mitigate these risks.

Substantive Analytical Procedures in Auditing Property, Plant, and Equipment

Analytical procedures for property, plant, and equipment include comparing recorded depreciation expense to industry averages or historical data, analyzing changes in asset carrying amounts, and evaluating reasonableness of capital expenditures. For example, a significant increase in equipment purchases in a period might prompt detailed review to ensure expenditure is justified and recorded correctly. Trend analysis and ratio analysis, such as asset turnover ratios, support the auditor in identifying anomalies needing further investigation.

Analytical Procedures in Income Statement Auditing

Substantive analytical procedures for income statements involve comparing current period figures with prior periods or budgets, ratio analysis like gross profit margin, and investigating any unusual fluctuations. For example, a sudden decrease in gross profit margin might signal misstatement or cutbacks in inventory valuation. These methods help auditors identify potential misstatements or fraud and assess overall reasonableness of reported net income.

Survey Analysis: Opinions and Design Issues

The survey aims to gauge employee performance and organizational effectiveness. Objectives include measuring skills, professionalism, honesty, responsibility sharing, and team dynamics. Respondents are employees across departments. Designing the survey involves issues such as question clarity, bias minimization, scale consistency, and reliability measurement. Validity ensures the survey measures intended attributes, while reliability assesses consistency over time. Methods like test-retest, internal consistency checks, and pilot testing are useful to ensure reliability.

Differences Between Qualitative and Quantitative Methods

Qualitative methods explore underlying reasons, opinions, and motivations, often through interviews and open-ended questions, providing in-depth insights. Quantitative methods involve numerical data collection, surveys with scaled questions, and statistical analysis to quantify variables. Quantitative research suits hypothesis testing and generalizations, while qualitative research is valuable for exploring complex phenomena, understanding context, or developing theories. Choosing the method depends on research objectives—quantitative for measuring prevalence, qualitative for exploring meanings.

Taxable Income Calculation: Personal Exemption and Deductions

For Kate, her gross income is her adjusted gross income minus deductions. Her gross income is $77,000. She has property taxes of $3,000, charitable contributions of $2,000, and mortgage interest of $7,000, totaling $12,000 in itemized deductions. The standard exemption is $3,900, so her taxable income is calculated as:

Taxable Income = Gross Income - Itemized Deductions - Personal Exemption

= $77,000 - $12,000 - $3,900 = $61,100

Calculation for Married Filing Jointly (Bob and Brenda)

a) Gross income is the sum of salaries and interest income: $180,000 + $12,000 = $192,000.

b) Adjusted gross income (AGI) subtracts deductible IRA contributions: $192,000 - $10,000 = $182,000.

c) Taxable income further deducts itemized deductions: $182,000 - $22,600 = $159,400.

Items Included in Gross Income

Gross income encompasses all income received from various sources before deductions. Common items include wages, salaries, interest and dividends, rental income, capital gains, business income, and other miscellaneous earnings such as winnings or alimony. Accurate reporting of gross income is essential as it forms the basis for computing taxable income and obligations.

Objectives and Controls in AIS Audits

As an auditor, objectives include assessing data accuracy, system security, compliance with policies, and safeguarding assets within the AIS. Techniques such as continuous monitoring through automated audit trails, real-time data analysis, and integrity checks are employed to collect evidence during operations. Regular evaluations of controls like access restrictions, transaction validations, and backup procedures help ensure system reliability and detect anomalies early.

Weaknesses and Controls in Revenue Cycle Activities

Weaknesses identified at O’Brien Corporation include improper inventory management, inaccuracies in shipping, and lack of physical inventory counts. Problems include shipping errors, delays, and uncollected revenues. Control procedures such as regular physical inventory counts, reconciliation of logs with inventory records, and improved order verification processes are recommended to strengthen internal controls and reduce errors.

The Expenditure Cycle and Its Threats

The expenditure cycle mirrors the revenue cycle but from the purchasing side. Typical threats include unauthorized purchases, supplier fraud, and duplicate payments. Controls such as segregation of duties, proper approval procedures, and periodic audit of supplier accounts can mitigate these risks.

Product Design Objectives and Software Components

The main goal of product design is to develop functional, cost-effective, and competitive products. Threats include design flaws, patent infringements, and delays. PLM (Product Lifecycle Management) software components like CAD integrations, collaboration tools, version control, and project tracking enhance design efficiency and accuracy, enabling better coordination and innovation.

References

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