Exam 6: The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures

Because a time clock is used,no supervision is required when employees enter and leave the work place.

Which department is responsible for approving changes in pay rates for employees?

Depreciation records include all of the following information about fixed assets except

The paymaster distributes paychecks to work center supervisors.

Fixed Asset Systems must keep track of the physical location of each asset to promote accountability.

Describe an internal control that would prevent the acquisition of office equipment which is not needed by the firm.

Which of the following situations represents a serious control weakness?

In a manufacturing firm,employees use time cards and job tickets.Which of the following statements is not correct?

The payroll department performs all of the following except

Asset disposal

When fixed assets are received,the receiving clerk sends copies of the receiving report to the inventory control clerk and the AP clerk.

The personnel action form provides authorization control by

Why should the employee's supervisor not distribute paychecks?

The Fixed Asset System performs all of the following except

Depreciation

Which of the following statements is not true?

The Baccus Corp.manufactures medical equipment.This is a capital intensive industry and investments in fixed assets exceed $5 million a year.The minimum cost for production equipment is $75,000.When supervisors want new production machinery,they contact the plant manager.The plant manager approves or denies the request based on discussions with the production supervisor,the repair and maintenance supervisor,and the quality control supervisor. A purchase order is prepared by the purchasing department and sent to one of the three major suppliers of production machinery for medical equipment.The equipment is delivered immediately to the production floor and put into service.At the end of the month,the production supervisor informs the general ledger clerk about the receipt of the machinery.The general ledger clerk establishes an asset record for the machine.At the end of the year,the general ledger clerk computes straight-line depreciation based on a 10-year life with a 10 percent salvage value.Depreciation expense is recorded as a direct reduction of the asset cost. The repair department performs routine maintenance on all of the production equipment.Occasionally the repair department rebuilds a machine to extend its useful life.All of the costs associated with the repair department are charged to manufacturing overhead.When a machine becomes obsolete,production employees move it to a corner of the factory floor and break it down so that parts can be used in other machines.Production employees routinely remove parts for personal use.Some smaller machines have disappeared completely from the factory floor. The general ledger clerk takes a physical inventory every three years.About 75 percent of the fixed assets can be located and identified.Other assets have serial numbers that are inaccessible,so the item cannot be matched to a fixed asset record.Some fixed asset records cannot be traced to an actual item.Several machines that have been scrapped and are being used for spare parts were matched to fixed asset records.At the last inventory,the general ledger clerk did not make any adjustments to the fixed asset records explaining that 75 percent accuracy in the fixed asset physical inventory was excellent. Describe five internal control weaknesses and explain how to correct them.

Describe an internal control that would prevent an employee from stealing a computer and then reporting it as scrapped.

Fixed asset accounting systems include cost allocation and matching procedures that are not part of routine expenditure systems.

List four types of data that appear on a depreciation schedule.