Finn Corporation produces inflatable rafts for recreational use. The company has heard about lean accounting, and is anxious to find out more about the system, to determine whether it will help streamline their operations and cut costs.

The company has hired you as a consultant to help them implement their lean accounting program, and also to assist with recreating some data lost in a recent computer mishap.

Chart of Accounts I

CHART OF ACCOUNTS

Finn Corporation

General Ledger

	ASSETS
110	Cash
112	Accounts Receivable
117	Office Supplies
118	Prepaid Insurance
150	Raw and In Process Inventory
151	Finished Goods Inventory
180	Land
190	Equipment
191	Accumulated Depreciation-Equipment
192	Store Equipment
193	Accumulated Depreciation-Store Equipment
194	Office Equipment
195	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
212	Unearned Rent
213	Customers Refunds Payable
215	Notes Payable
218	Sales Tax Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends
313	Income Summary

	REVENUE
410	Sales

	EXPENSES
510	Cost of Goods Sold
511	Conversion Costs
521	Advertising Expense
522	Depreciation Expense-Store Equipment
530	Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
539	Miscellaneous Expense
710	Interest Expense

Chart of Accounts II

CHART OF ACCOUNTS

Finn Corporation

General Ledger

	ASSETS
110	Cash
112	Accounts Receivable
117	Office Supplies
118	Prepaid Insurance
150	Materials Inventory
160	Work in Process Inventory
170	Finished Goods Inventory
180	Land
190	Equipment
191	Accumulated Depreciation-Equipment
192	Store Equipment
193	Accumulated Depreciation-Store Equipment
194	Office Equipment
195	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
212	Unearned Rent
213	Customers Refunds Payable
215	Notes Payable
218	Sales Tax Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends
313	Income Summary

	REVENUE
410	Sales

	EXPENSES
510	Cost of Goods Sold
511	Factory Overhead
521	Advertising Expense
522	Depreciation Expense-Store Equipment
530	Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
539	Miscellaneous Expense
710	Interest Expense

Selecting Chart of Accounts

The companys accounting intern is new and has confused the Finn Corporations regular chart of accounts with the proposed chart of accounts for the lean accounting system.

Review the charts of accounts on the Chart of Accounts I and Chart of Accounts II panels, and then answer the following question.

Which chart of accounts should Finn Corporation most likely implement if they want to use lean accounting principles?

Chart of Accounts II

Chart of Accounts I

Either Chart of Accounts works equally well

Cost of Quality Report

This year, Finn Corporation implemented programs designed to assess the costs of quality for the company. However, the company recently suffered a data loss, and some of its records have been either partially or completely erased. The accounting intern for Finn Corporation has located a copy of a recent cost of quality report, shown as follows, but the quality activity analysis used to create the report has been lost.

Finn Corporation

Cost of Quality Report

1	Quality Cost Classification	Quality Cost	Percent of Total Quality Cost	Percent of Total Sales
2	Prevention	$336,300.00	59.0%	17.7%
3	Appraisal	85,500.00	15.0	4.5
4	Internal failure	68,400.00	12.0	3.6
5	External failure	79,800.00	14.0	4.2
6	Total	$570,000.00	100.0%	30.0%

Quality Activity Analysis

As mentioned on the Cost of Quality Report panel, Finn Corporation recently suffered a data loss, and some of its records have been lost. After reviewing the Cost of Quality Report panel, recreate the quality activity analysis in the following table from which the cost of quality report was created.

Finn Corporation

Quality Activity Analysis

1	Rework
2	Inspecting incoming raw materials
3	Warranty work
4	Process improvement effort
5	Total activity cost	$570,000.00