Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 16E
To determine
State whether each of the procedures is appropriate or inappropriate, after considering the principles of internal control.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Payroll Internal Control Procedures
Big Howie's Hot Dog Stand is a fast-food restaurant specializing in hot dogs and hamburgers. The store employs 8 full-time and 12 part-time workers. The store's weekly payroll averages $5,600 for all 20 workers.
Big Howie’s uses a personal computer to assist in preparing paychecks. Each week, the store’s accountant collects employee time cards and enters the hours worked into the payroll program. The payroll program calculates each employee’s pay and prints a paycheck. The accountant uses a check-signing machine to sign the paychecks. Next, the restaurant’s owner/ manager authorizes the transfer of funds from the restaurant’s regular bank account to the payroll account.
For the week of May 12, the accountant accidentally recorded 100 hours worked instead of 40 hours for one of the full-time employees.
Does Big Howie's Hot Dog Stand have internal controls in place to catch this error?
If so, how will this error be detected?
Dave’s Scooters is a small manufacturer of specialty scooters. The company employs 14 production workers and four administrative persons. The following procedures are used to process the company’s weekly payroll:a. Whenever an employee receives a pay raise, the supervisor must fill out a wage adjustment form, which is signed by the company president. This form is used to change the employee’s wage rate in the payroll system.b. All employees are required to record their hours worked by clocking in and out on a time clock. Employees must clock out for lunch break. Due to congestion around the time clock area at lunch time, management has not objected to having one employee clock in and out for an entire department.c. Whenever a salaried employee is terminated, Personnel authorizes Payroll to remove the employee from the payroll system. However, this procedure is not required when an hourly worker is fired. Hourly employees only receive a paycheck if their time cards show hours worked.…
Employees at the Sagerod Manufacturing Company record their hours worked on paper time cards that are inserted into a time clock machine at the beginning and end of each shift. On Fridays, the supervisor collects the time cards, reviews and signs them, and sends them to the payroll clerk. The clerk calculates the pay for each employee and updates the employee earnings file. This involves adding a new record for each employee in the pay period that reflects the employee’s gross pay, tax deductions, and other withholdings for the period. The clerk then prepares a paycheck for each employee and records them in the check register. The check register and corresponding paychecks reflect each employee’s net earnings for the period. Based on these records, the clerk prepares a payroll summary, which is sent with the paychecks to the cash disbursements clerk. The clerk reviews the payroll summary, updates the cash disbursements journal to record the total payroll, and prepares a check for the…
Chapter 11 Solutions
Financial Accounting
Ch. 11 - Does a discounted note payable provide credit...Ch. 11 - Employees are subject to taxes withheld from their...Ch. 11 - Prob. 3DQCh. 11 - Prob. 4DQCh. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - Prob. 7DQCh. 11 - Prob. 8DQCh. 11 - When should the liability associated with a...Ch. 11 - Prob. 10DQ
Ch. 11 - Proceeds from notes payable On May 15, Maynard Co....Ch. 11 - Proceeds from notes payable On January 26, Nyree...Ch. 11 - Prob. 2PEACh. 11 - Prob. 2PEBCh. 11 - Prob. 3PEACh. 11 - Prob. 3PEBCh. 11 - Journalize period payroll The payroll register of...Ch. 11 - Journalize period payroll The payroll register of...Ch. 11 - Journalize payroll tax The payroll register of...Ch. 11 - Journalize payroll tax The payroll register of...Ch. 11 - Prob. 6PEACh. 11 - Prob. 6PEBCh. 11 - Prob. 7PEACh. 11 - Prob. 7PEBCh. 11 - Quick ratio Nabors Company reported the following...Ch. 11 - Quick ratio Adieu Company reported the following...Ch. 11 - Current liabilities Bon Nebo Co. sold 25,000...Ch. 11 - Entries for notes payable Cosimo Enterprises...Ch. 11 - Entries for discounting notes payable Ramsey...Ch. 11 - Evaluating alternative notes A borrower has two...Ch. 11 - Entries for notes payable A business issued a...Ch. 11 - Entries for discounted note payable A business...Ch. 11 - Entries for notes payable Bull City Industries is...Ch. 11 - Prob. 8ECh. 11 - Calculate payroll An employee earns 25 per hour...Ch. 11 - Prob. 10ECh. 11 - Summary payroll data In the following summary of...Ch. 11 - Payroll tax entries According to a summary of the...Ch. 11 - Payroll entries The payroll register for Gamble...Ch. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Accrued vacation pay A business provides its...Ch. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Accrued product warranty General Motors...Ch. 11 - Prob. 22ECh. 11 - Quick ratio Gmeiner Co. had the following current...Ch. 11 - Prob. 24ECh. 11 - Liability transactions The following items were...Ch. 11 - Entries for payroll and payroll taxes The...Ch. 11 - Wage and tax statement data on employer FICA tax...Ch. 11 - Prob. 4PACh. 11 - Payroll accounts and year-end entries The...Ch. 11 - Prob. 1PBCh. 11 - Entries for payroll and payroll taxes The...Ch. 11 - Wage and tax statement data and employer FICA tax...Ch. 11 - Prob. 4PBCh. 11 - Payroll accounts and year-end entries The...Ch. 11 - Prob. 3CPPCh. 11 - Ethics in Action Tonya Latirno is a staff...Ch. 11 - Prob. 2CPCh. 11 - Communication WBM Motorworks is a manufacturer of...Ch. 11 - Recognizing pension expense The annual examination...Ch. 11 - Prob. 7CP
Knowledge Booster
Similar questions
- An analysis of the payroll for the month of November for CinMar Inc. reveals the information shown: All regular time Andrews, Lomax, and Herzog are production workers, and Dimmick is the plant manager. Hendrick is in charge of the office. Cumulative earnings paid (before deductions) in this calendar year prior to the payroll period ending November 8 were as follows: Andrews, 21,200; Lomax, 6,800; Herzog, 11,500; Dimmick, 116,200; and Hendrick, 32,800. The solution to this problem requires the following forms, using the indicated column headings: 1. Prepare an employee earnings record for each of the five employees. 2. Prepare a payroll record for each of the four weeks. 3. Prepare a labor cost summary for the month. 4. Prepare journal entries to record the following: a. The payroll for each of the four weeks. b. The payment of wages for each of the four payrolls. c. The distribution of the monthly labor costs per the labor cost summary. d. The company's payroll taxes covering the four payroll periods.arrow_forwardPayroll for piece-rate wage system Collier Manufacturing Co. operates on a modified wage plan. During one weeks operation, the following direct labor costs were incurred: The employees are machine operators. Piece rates vary with the kind of product being produced. A minimum of 70 per day is guaranteed to each employee by union contract. Required: 1. Compute the weekly earnings for Travis, Nessman, and Smithers. 2. Prepare journal entries to: a. record the weeks payroll, assuming that none of the employees has achieved the maximum base wage for FICA taxes. The income tax withheld for each employee amounts to 10% of gross wages. b. record payment of the payroll. c. record the employers share of payroll taxes, assuming that none of the employees has achieved the maximum base wage for FICA or unemployment taxes.arrow_forwardPayment and distribution of payroll The general ledger of Berskshire Mountain Manufacturing Inc. showed the following credit balances on January 15: Direct labor earnings amounted to 10,500 from January 16 to 31. Indirect labor was 5,700, and sales and administrative salaries for the same period amounted to 3,800. All wages are subject to FICA, FUTA, state unemployment taxes, and 10% income tax withholding. Required: 1. Prepare the journal entries for the following: a. Recording the payroll. b. Paying the payroll. c. Recording the employers payroll tax liability. d. Distributing the payroll costs for January 1631. 2. Prepare the journal entry to record the payment of the amounts due for the month to the government for FICA and income tax withholdings. 3. Calculate the amount of total earnings for the period from January 1 to 15. 4. Should the same person be responsible for computing the payroll, paying the payroll and making the entry to distribute the payroll? Why or why not?arrow_forward
- Huron Manufacturing Co. uses a job order cost system to cost its products. It recently signed a new contract with the union that calls for time-and-a-half for all work over 40 hours a week and double-time for Saturday and Sunday. Also, a bonus of 1% of the employees earnings for the year is to be paid to the employees at the end of the fiscal year. The controller, the plant manager, and the sales manager disagree as to how the overtime pay and the bonus should be allocated. An examination of the first months payroll under the new union contract provisions shows the following: Analysis of the supporting payroll documents revealed the following: a. More production was scheduled each day than could be handled in a regular workday, resulting in the need for overtime. b. The Saturday and Sunday hours resulted from rush orders with special contract arrangements with the customers. The controller believes that the overtime premiums and the bonus should be charged to factory overhead and spread over all production of the accounting period, regardless of when the jobs were completed. The plant manager favors charging the overtime premiums directly to the jobs worked on during overtime hours and the bonus to administrative expense. The sales manager states that the overtime premiums and bonus are not factory costs chargeable to regular production but are costs created from administrative policies and, therefore, should be charged only to administrative expense. Required: 1. Evaluate each positionthe controllers, the plant managers, and the sales managers. If you disagree with all of the positions taken, present your view of the appropriate allocation. 2. Prepare the journal entries to illustrate the position you support, including the accrual for the bonus.arrow_forwardAutomated Application Controls. The following provides a brief description of the computerized payroll system used by Merriman in its biweekly processing of payroll for its employees.1. Employees automatically record their attendance (hours worked) as they log in at thebeginning and end of the workday.2. At the end of each payroll period (every two weeks), employees print and authorizetheir attendance records, submitting them to their supervisor. The computer prenumbersthese attendance records and generates them in chronological order based on when theemployee submits his or her final attendance for that payroll period.3. Supervisors review the attendance records submitted by their employees and authorizethese records, which the supervisors then forward to data entry conversion operators.4. Data conversion operators input the attendance record number, employee number, andhours worked from the attendance records that have been approved by the employeesupervisors into a file to be used…arrow_forwardPayroll Audit Procedures, Computers, and Sampling. You are the senior auditor in charge of the annual audit of Onward Manufacturing Corporation for the year ending December 31. The company is of medium size with only 300 employees. All 300 employees are union members paid by the hour at rates set forth in a union contract, a copy of which is furnished to you. Job and pay rate classifications are determined by a joint union– management conference, and a formal memorandum is placed in each employee’s personnel file.Every week, clock cards prepared and approved in the shop are collected and transmitted to the payroll department. The total of labor hours is summed on a calculator and entered on each clock card. Batch and hash totals are obtained for the following: (1) labor hours and (2) last four digits of Social Security numbers. These data are input into a disk file, batch balanced, and batch processed. The clock cards (with cost classification data) are sent to the cost accounting…arrow_forward
- A Forman of a construction company is responsible for a construction crew comprised of many unskilled workers. The work is hard, and employee turnover rate is high with individuals often leaving without notice. Throughout the work week employees record their attendance on separate time cards, which the foreman approves and submits to the payroll department at the end of week. Based on the time cards, the payroll department prepares the paychecks, sends them to the foreman who then distributes the checks to his work crew. 1-Identify the segregation of duties problems in the system. 2-What sorts of fraud may result from the above control problem(s)?arrow_forwardA Forman of a construction company is responsible for a construction crew comprised of many unskilled workers. The work is hard, and the employee turnover rate is high with individuals often leaving without notice. Throughout the workweek, employees record their attendance on separate time cards, which the foreman approves and submits to the payroll department at the end of the week. Based on the time cards, the payroll department prepares the paychecks and sends them to the foreman who then distributes the checks to his work crew. 1) Identify the segregation of duties problems in the system. 2) What sorts of fraud may result from the above control problem(s)?arrow_forwardA Forman of a construction company is responsible for a construction crew comprised of many unskilled workers. The work is hard, and the employee turnover rate is high with individuals often leaving without notice. Throughout the workweek, employees record their attendance on separate time cards, which the foreman approves and submits to the payroll department at the end of the week. Based on the time cards, the payroll department prepares the paychecks and sends them to the foreman who then distributes the checks to his work crew. 1) Identify the segregation of duties problems in the system.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningAccounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Pkg Acc Infor Systems MS VISIO CDFinanceISBN:9781133935940Author:Ulric J. GelinasPublisher:CENGAGE LExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:9781133935940
Author:Ulric J. Gelinas
Publisher:CENGAGE L
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,