All of the following are true regarding the management and monitoring of cash except O companies may have plenty of sales, but insufficient cash to support operations. companies should have sufficient cash to meet payments and maximize the amount of available cash on hand. the cash to cash operating cycle for a manufacturer is generally longer than that of a merchandising company. manufacturers may experience a significant lag between the purchase of raw materials and the receipt of cash from customers.

All of the following are true regarding the management and monitoring of cash except O companies may have plenty of sales, but insufficient cash to support operations. companies should have sufficient cash to meet payments and maximize the amount of available cash on hand. the cash to cash operating cycle for a manufacturer is generally longer than that of a merchandising company. manufacturers may experience a significant lag between the purchase of raw materials and the receipt of cash from customers.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 14MCQ: The percentage of accounts receivable that is uncollectible can be ignored for cash budgeting...

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The term Cash Management refers to the day-to-day administration of managing cash inflows and outflows. Because of the multitude of cash transactions on a daily basis, they must be managed. The ultimate goal of cash management is to maximize liquidity and minimize the cost of funds and it is extremely crucial for any organization as mismanagement can lead to financial distress. This impacts future growth for the company. Maintaining cash balances while earning a return on idle cash are also top concerns.Cash management allows estimating the cash profits and not just profits from outstanding incomes and credit sales. It helps in detecting cash embezzlement. It allows in speeding up the working capital cycle. It helps in rewarding such debtors that make quicker payments.Discuss in detail the services generally offered by banks under the Cash management services arrangement.
A major retail outlet is facing shortages for its supplies, and is facing complaints from its customers. This was due to the company repeatedly delaying payments to their suppliers, resulting in quite a number of them refusing to give further orders until payments have been made. In the meantime, the retail company is facing cash flow problems. Comment on the main issue in the above scenario and suggest some solutions to overcome it.
Case 1 ABC Company is a relatively small dry-cleaning operation that has a very steady level of business. Since the company hired a new employee, however, cash inflows have decreased and the amount of promotional coupon redemptions have increased dramatically. The owner of the company has been very impressed with this new employee, but has suspicions regarding her cashiering practices. When comparing cash sales to check and credit card sales, the owner noted that the coupon redemption rate was dramatically higher for cash sales. The owner does not want to wrongly accuse the employee if she is innocent, but does want to find out if fraud is occurring. The owner calls you as an expert on fraud and asks you to recommend a reliable way to gather evidence that could determine if fraud is occurring. 1. What are some possible investigative methods you could suggest?
Each situation below describes an internal control weakness in the cash payments process. Identifywhich of the five internal control principles is violated, explain the weakness, and then suggest achange that would improve internal control.a. The warehouse clerk is responsible for ordering inventory when levels become low and advising the accounting department to issue a payment to the supplier when ordered goods arereceived.b. For each purchase, the accountant compares the purchase order (prepared by the purchasing manager) to the receiving report (prepared by warehouse employees) and then attachesthese documents to the corresponding supplier invoice and files them by supplier name. Theaccountant then prepares a check, which the owner merrily signs and sends to the mail clerkfor mailing.c. The check-signing machine is stored with a supply of blank checks in the lunch room closet.d. Purchase orders can be approved by the purchasing manager, accountant, or warehouse supervisor,…
Determine whether each policy below is good or bad cash management, then identify the cash management strategy violated or followed for each policy. 1. The company negotiates credit terms with suppliers to delay payment of liabilities as long as possible 2. Excess cash is put in checking accounts, earning no interest income. 3. Cash receipts and cash payments are regularly planned and reviewed. 4. Customers are offered discounts to pay early. 5. All equipment is purchased, even equipment infrequently used. Good or Bad Cash Management Strategy
The establishment and usage of a zero-balance account in relation to the cash management strategies of a firm generally decreases all except one a. any excess bank balance b. processing time c. any disbursement float d. the annual cost of cash
A fellow student studying managerial accounting says. The net present value (NPV) weighs early receipts of cash much more heavily than more distant receipts of cash. Do you agree or disagree? Why?
The percentage of accounts receivable that is uncollectible can be ignored for cash budgeting because a. no cash is received from an account that defaults. b. it is included in cash sales. c. it appears on the budgeted income statement. d. for most companies, it is not a material amount. e. None of these.
Consider the following conversation between Gary Means, manager of a division that produces industrial machinery, and his controller, Donna Simpson, a certified management accountant and certified public accountant: Gary: Donna, we have a real problem. Our operating cash is too low, and we are in desperate need of a loan. As you know, our financial position is marginal, and we need to show as much income as possibleand our assets need bolstering as well. Donna: I understand the problem, but I dont see what can be done at this point. This is the last week of the fiscal year, and it looks like well report income just slightly above breakeven. Gary: I know all this. What we need is some creative accounting. I have an idea that might help us, and I wanted to see if you would go along with it. We have 200 partially finished machines in process, about 20% complete. That compares with the 1,000 units that we completed and sold during the year. When you computed the per-unit cost, you used 1,040 equivalent units, giving us a manufacturing cost of 1,500 per unit. That per-unit cost gives us cost of goods sold equal to 1.5 million and ending work in process worth 60,000. The presence of the work in process gives us a chance to improve our financial position. If we report the units in work in process as 80% complete, this will increase our equivalent units to 1,160. This, in turn, will decrease our unit cost to about 1,345 and cost of goods sold to 1.345 million. The value of our work in process will increase to 215,200. With those financial stats, the loan would be a cinch. Donna: Gary, I dont know. What youre suggesting is risky. It wouldnt take much auditing skill to catch this one. Gary: You dont have to worry about that. The auditors wont be here for at least 6 to 8 more weeks. By that time, we can have those partially completed units completed and sold. I can bury the labor cost by having some of our more loyal workers work overtime for some bonuses. The overtime will never be reported. And, as you know, bonuses come out of the corporate budget and are assigned to overheadnext years overhead. Donna, this will work. If we look good and get the loan to boot, corporate headquarters will treat us well. If we dont do this, we could lose our jobs. Required: 1. Should Donna agree to Garys proposal? Why or why not? To assist in deciding, review the corporate code of ethics standards described in Chapter 1. Do any apply? 2. Assume that Donna refuses to cooperate and that Gary accepts this decision and drops the matter. Does Donna have any obligation to report the divisional managers behavior to a superior? Explain. 3. Assume that Donna refuses to cooperate; however, Gary insists that the changes be made. Now what should she do? What would you do? 4. Suppose that Donna is 63 and that the prospects for employment elsewhere are bleak. Assume again that Gary insists that the changes be made. Donna also knows that his supervisor, the owner of the company, is his father-in-law. Under these circumstances, would your recommendations for Donna differ?
Evaluating internal control over cash payments Gary’s Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary’s, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor. Requirements Identify the internal control weakness over cash payments. What could the business do to correct the weakness?
In your view, what would cause the cash book of an enterprise to disagree with the bank statement at the of month? Explain what you would include under Cost of sales of an enterprise during the preparation of final accounts for your organization?
Understanding Sarbanes-Oxley and identifying internal control strengths and weaknesses The following situations suggest a strength or a weakness in internal control. a. Top managers delegate all internal control procedures to the accounting department. b. Accounting department staff (or the bookkeeper) orders merchandise and approves invoices for payment. c. Cash received over the counter is controlled by the sales clerk, who rings up the sale and places the cash in the register. The sales clerk matches the total recorded by the register to each day’s cash sales. d. The employee who signs checks need not examine the payment packet because he is confident the amounts are correct. Requirements 1. Define internal control 2. The system of internal control must be tested by external auditors. What law or rule requires this testing? 3. Identify each item in the list above as either a strength or a weakness in internal control, and give your reason for each answer.