AUDITING I HANDOUT PROBLEM 9 Score Name Section Problem (10 points). Lion's Dental Supply (LDS) is a dental supply distributor located in Haverstraw. New York. It was founded in 1985 and has grown rapidly since then. Despite the large clientele, Lion's only employs nine people. LDS operations consist of purchasing various dental supplies from their producers and selling those supplies to dentists located within a 30 mile radius of the warehouse. LDS's expenditure cycle consists of the purchasing and cash disbursements functions. The purchasing function uses three departments of the company: warehouse, accounts payable, and general ledger. The attached narrative describes the functions performed. REQUIRED: Prepare a document flowchart, in appropriate form, using the narrative provided below. LION'S DENTAL SUPPLY NARRATIVE FOR THE PURCHASING FUNCTION AND FUNCTIONS PERFORMED The warehouse manager is responsible for maintaining inventory levels. When the stock is low on an item, she prepares a purchase order. One copy of the order is sent to the vendor, one is sent to accounts payable, and one is filed in the warehouse for later use. When an order is received the goods are counted and the quantities are compared to those on the purchase order. A receiving report is then prepared, listing the actual quantities received. One copy of the receiving report is sent to the accounts payable department for temporary filing. A second copy remains in the warehouse to update the inventory subsidiary ledgers. After the update, this copy is filed by the receiving report number. The purchase order is filed by purchase order number. An accounts payable clerk files all receiving reports remitted by the warehouse. Then, once the invoice is received by the accounts payable department, it is checked against the receiving report and the purchase order. If all quantities and prices are correct, the accounts payable subsidiary ledgers are updated. The purchase order and receiving report are then attached to the invoice, and the invoice package is filed chronologically by due date. At the end of the day, the totals from the subsidiary ledgers are sent to the general ledger, where they are reconciled with the accounts payable totals. The cash disbursements function begins when invoices become due. The accounts payable department sends an invoice to the cash disbursements department. Rebecca "Dicky" Howe, the president and owner, writes all checks. At the end of the day, checks are mailed out to the vendors. Next, she records the transaction into the cash disbursements journal and returns the invoice to the accounts payable department. Once again, the subsidiary ledgers are updated and the invoice is filed chronologically. At the end of the day, both departments send batch totals to the general ledger for reconciliations. This completes the expenditure cycle for Lion's Dental Supply. AUDITING I HANDOUT PROBLEM 9 Score Name Section Problem (10 points). Lion's Dental Supply (LDS) is a dental supply distributor located in Haverstraw. New York. It was founded in 1985 and has grown rapidly since then. Despite the large clientele, Lion's only employs nine people. LDS operations consist of purchasing various dental supplies from their producers and selling those supplies to dentists located within a 30 mile radius of the warehouse. LDS's expenditure cycle consists of the purchasing and cash disbursements functions. The purchasing function uses three departments of the company: warehouse, accounts payable, and general ledger. The attached narrative describes the functions performed. REQUIRED: Prepare a document flowchart, in appropriate form, using the narrative provided below. LION'S DENTAL SUPPLY NARRATIVE FOR THE PURCHASING FUNCTION AND FUNCTIONS PERFORMED The warehouse manager is responsible for maintaining inventory levels. When the stock is low on an item, she prepares a purchase order. One copy of the order is sent to the vendor, one is sent to accounts payable, and one is filed in the warehouse for later use. When an order is received the goods are counted and the quantities are compared to those on the purchase order. A receiving report is then prepared, listing the actual quantities received. One copy of the receiving report is sent to the accounts payable department for temporary filing. A second copy remains in the warehouse to update the inventory subsidiary ledgers. After the update, this copy is filed by the receiving report number. The purchase order is filed by purchase order number. An accounts payable clerk files all receiving reports remitted by the warehouse. Then, once the invoice is received by the accounts payable department, it is checked against the receiving report and the purchase order. If all quantities and prices are correct, the accounts payable subsidiary ledgers are updated. The purchase order and receiving report are then attached to the invoice, and the invoice package is filed chronologically by due date. At the end of the day, the totals from the subsidiary ledgers are sent to the general ledger, where they are reconciled with the accounts payable totals. The cash disbursements function begins when invoices become due. The accounts payable department sends an invoice to the cash disbursements department. Rebecca "Dicky" Howe, the president and owner, writes all checks. At the end of the day, checks are mailed out to the vendors. Next, she records the transaction into the cash disbursements journal and returns the invoice to the accounts payable department. Once again, the subsidiary ledgers are updated and the invoice is filed chronologically. At the end of the day, both departments send batch totals to the general ledger for reconciliations. This completes the expenditure cycle for Lion's Dental Supply