TRIPLE PLAY, INC Triple Play, Inc. was established in 1982 by Randy Cleaver, Jim Bluefish Johnson, and Willie Lloyd, all ex-major league baseball players who were interested in offering quality baseball mitts at affordable prices. These players felt that, at the time, baseball glove manufacturers did not have a good sense of what the player needed in a baseball glove. They felt that they could gain a large portion of the market share by using their marketable names and having confidence in producing quality products. During their years as professional baseball players, these men established a large network of acquaintances through many avenues. They had good reputations with their coaches and management, minor league farm systems, and also little league baseball players as a result of the various baseball clinics they ran during their careers. Operations commenced in 1982 in Williamsport, Pennsylvania under complete supervision of Johnson, yet all three were close friends and agreed upon becoming business partners directly after retirement. They all had solid business backgrounds and considered success in business more challenging than success in baseball. During the first three years, Cleaver and Lloyd were still playing and agreed in written contract form to be sponsors for the gloves that were manufactured, allowing Johnson to market their names along with his on the palm of each glove. During this time, Johnson was busy solidifying the business and establishing working business relationships within the strong network he established as a player. In 1985, Cleaver retired and joined Johnson in the operations. They continued using Lloyds name on the gloves until he retired in 1990. Cleaver and Johnson together set up contracts for 11 suppliers and were steadily improving the financial status of the company, increasing revenues from $600,000 on about 12,000 glove sales in 1982 to over $5 million in revenues on around 83,000 glove sales in 1985. Yet they were experiencing problems with their quality that they hadnt expected. Some of the suppliers were simply not producing the top-notch rawhide that they needed to use in their production process. After much discussion, Lloyd remembered something from his schooling at Harvard that gave them the much-needed insight to solve their problems. Having 11 suppliers doesnt give you the opportunity to establish large contracts with suppliers that are essential to their business, Lloyd said. Smaller contracts arent necessary to their survival. Instead, we should be focused on having large contracts with a smaller amount of suppliers. We will recognize the importance of every supplier and deal with them better and, in return, they will reward the large contract they have by making sure that quality is their number one priority. Lloyd was right. They reduced their suppliers to only 5 in 1989 and have kept the same number since then. They currently receive their rawhide shipments from Joes Leather, Jims Leather, and Bobs Leather, all privately owned rawhide manufacturers in Pennsylvania, as well as from Chang Tao Mengs Leather and (Raw) Hide and Dry, manufacturers of rawhide in China and Canada, respectively. The shipments sent by (Raw) Hide and Dry are sent by train, while those sent from Chang Tao Mengs Leather are sent by boat. Although transportation costs are significantly higher via boat, laborers are paid $2.50 an hour in China, less than half the rate paid to U.S. laborers, and Chang Tao Mengs is able to charge lower prices for their rawhide. (Raw) Hide and Dry has an immense supply of rawhide as Canada has the largest population of cows per square mile in the world. In 1990, Lloyd joined the force full-time and provided his expertise at a time when it was much needed. Triple Play, Inc. was at a crossroads in its life as a baseball glove manufacturer in 1991. Baseball was becoming more popular with youngsters and companies like Rawlings and Wilson were taking advantage of this increased popularity. They not only offered multiple sizes of baseball gloves, but they also produced softball gloves and baseball apparel. At the time, Triple Play offered only four types of gloves infielder, outfielder, pitcher, and catcher. Lloyd and the marketing team conducted investigative research into the wants of their existing and potential customers. They found out that every player has specific needs for their own style of glove and that many people want gloves that fit their hands tightly or loosely. Up until then, Triple Play manufactured only one size for each type of glove, not realizing the need to manufacture different sizes of gloves. With Lloyds help, Cleaver, Johnson, and others began manufacturing two variations of each of the four types of gloves manufactured previously. They also began making softball gloves and now, in 1999, have three variations of softball gloves as well. With these revamped products, Triple Plays market share has increased from a miniscule 2.5 percent in 1991 to almost 23 percent in 1999. Sales last year were about 260,000 gloves a year, consisting of about 45,000 sales of softball gloves and 215,000 sales of baseball gloves. Their total revenues topped $20 million and their market capitalization is about $50 million. Triple Play has 201 employees working for them in their plant in Williamsport, Pennsylvania and they sell directly to retailers. Currently, sales are received through the telephone and mail, yet they are seriously considering purchasing from their suppliers and selling to their retailers through an automated system that has been available for a couple of years. Demand rose sharply over the last year due to the skyrocketing increase in popularity resulting from the famed home run chase by Mark McGwire and Sammy Sosa. As a result, Triple Play is having difficulty keeping up with customer orders received from their retailers. The average lead time ranges from 14 days for infielder gloves to 30 days for softball gloves, yet retailers are demanding that they shorten their lead times to 12 and 26, respectively, in order to keep up with demand. Demand estimation needs to be extremely precise because the shipments that Triple Play receives from Chang Tao Mengs Leather in China take over five days to reach the production facility in Williamsport. If Triple Play misses demand requests, the lead time is extended five days for each glove. They need to tell their suppliers ahead of time what quantity of rawhide they need, as requested by their retailers. The Revenue Cycle Sales Order Processing System The customer sales order is received via phone or through the mail. Gus Grinwich, the sales clerk, receives the sales order and checks the customers credit record. Once Grinwich checks the customers credit record, he prepares the sales order. From this sales order, Grinwich prepares a customer copy, stock release, shipping notice, two copies of the invoice, ledger copy, packing slip, and the file copy. One of the invoice copies, the ledger copy, and the file copy go to the billing department. The other copy of the invoice and the shipping notice are sent to the shipping department. The stock release and the file copy are sent to the warehouse department. In the warehouse department, Steve Rossini, the warehouse clerk, receives the stock release and Phil Denuto, the stocker, checks the shelves to pick the gloves for the sales order. Once the goods are taken off the shelf in the warehouse, the stock release is sent to the billing department. Sparky Littleton, the billing clerk, reconciles the invoice, ledger copy, and stock release to make sure that the amount of inventory taken from the shelves is the same as the amount listed in the invoice. Littleton bills the customer for the goods released from the warehouse department. Littleton prepares the sales journal and makes the journal voucher. The journal voucher is sent to the general ledger department. The stock release is sent to the inventory control. The invoice is then filed in the billing departments file and the ledger copy is sent to the general ledger department. The shipping department receives the invoice and the shipping notice. They send the goods to the carrier along with the invoice, the packing slip, and the two copies of the bill of lading. The invoice states the amount and quantity of goods that the customer requested in the sales order form. The shipping department files the shipping notice from the customers order. Inventory control receives the stock release form from the billing department. With the stock release form, Bobby Higgins, the inventory clerk, updates the inventory account relating to the goods that have been released from the warehouse. The ledger copy arrives from the billing department. Dave Fielder, the general ledger clerk, uses the ledger copy to update the accounts receivable records. Fielder takes the accounts receivable summary, the journal voucher from the inventory subsidiary ledger, and the journal voucher produced by the sales journal in the billing department and updates the general ledger files. These three forms are then filed by Fielder. The Cash Receipts System The cash receipts system starts when the wholesalers send back the remittance advice with their payment. This allows Craig Nelson, the mail room clerk, to collect the payment from the customer and process the cash receipt. Nelson then records the cash receipts in the cash receipts journal. Nelson prepares the deposit slips for the funds to be deposited into the bank along with the checks. The remittance advice is sent to the general ledger department to update the accounts receivable records and is then filed in the billing department. Finally, Nelson prepares the cash receipt journal, out of which comes a journal voucher that is sent to the general ledger department. Luis Gonzalez, the general ledger clerk, prepares the account summary and journal voucher, which is used to update the general ledger. The account summary and journal voucher is put into the files for record. Gonzalez uses the remittance advice copy sent from the mail room, the deposit slip copy from the bank, and the journal voucher from the account summary to reconcile the deposit slips. He then reconciles the deposit slips from the bank with the totals from the accounts receivable and mail room. Expenditure Cycle Purchasing System Inventory control receives a list of items in inventory and total amounts in each category. The inventory control clerk, Keith Fernando, is given these totals for all gloves (softball, infielder, outfielder, catcher, and pitcher). The totals are calculated by the inventory control system, called PICS (Physical Inventory Control Scanner). PICS is an automated system used to determine the amounts of inventories at specific times. It scans in the inventory when received in the receiving department and scans it out upon shipment. For example, when the total for all infielder gloves, consisting of two separate types, drops to the predetermined reorder point, Fernando will prepare a purchase requisition (PR). Two copies of the purchase requisition are made. One is sent to purchasing to be used to prepare a purchase order (PO) at a later date. Inventory control receives the other copy and waits for a copy of the purchase order from purchasing in order to reconcile the amounts on the PR with the amounts on the PO. Fernando makes a purchase requisition for each item that drops to the reorder point. Inventory control receives a copy of the purchase order from purchasing and compares it to the second copy of the purchase requisition. These two forms are kept in an open account that is filed by purchase requisition number and kept in an open account until notification that the items have been received by the receiving department via the receiving report (RR). The RR is then compared with the PO and PR to make sure that the items received are identical to the items ordered. These three forms are posted to the inventory ledger and a summary report is generated and sent to the general ledger. The receiving report, purchase order, and purchase requisition are then filed in a closed account in the inventory control department by purchase requisition number. Purchasing receives the purchase requisition from inventory control, sorts the purchase requisitions, and prepares a multi-part purchase order. The purchasing manager, Jack Tucker, chooses the supplier based on the five-supplier list given by management. One copy of the PO is sent to inventory control, where Fernando files it with the open purchase requisition. One copy is sent to the accounts payable department to be filed in the accounts payable pending file. Another copy is sent to the receiving department to be filed until the inventories arrive. One copy is mailed to the supplier. The last copy is kept in purchasing and is filed along with the purchase requisition received by inventory control in the open purchase order file, awaiting the receiving report sent by the receiving department to confirm that inventories have been received. Purchasing is sent an invoice by the supplier through the mail that charges Triple Play the dollar amount for the inventories requested. This is kept in the open purchase order file until the receiving report is received. When the receiving report is received, the purchase order and suppliers invoice are taken out of the open purchase order file and the amounts are then compared with those on the receiving report. All three of these reports are then filed in the closed purchase order file, sorted by purchase order number. Purchasing then sends a message through a computer terminal to the accounts payable department that is a copy of the invoice received and simply states the cost and quantity of the shipment received. The message is received by a computer terminal in the accounts payable department. Only the purchasing keyboard clerk, Lenny Sipowicz, can access the terminal, and only he knows the password needed to enter into the system. The same authority is given to the accounts payable department keyboard clerk, Danny Thomson. The message sent by purchasing is identical to the invoice received and is sent to accounts payable usually two days later, after reconciling the invoice, PO, and RR. The invoice is then filed. The receiving department receives the goods and reconciles the information attached to the shipment with the information listed on the purchase order sent from purchasing. The receiving clerk, Manuel Barriero, pulls the PO from the file and checks to see that the inventory received is the same as the quantity and price information given by the purchase order. After checking that the information is correct, Barriero prepares a receiving report stating that the mercandise was received. One copy of the receiving report is sent to the retailers to notify them that the production process is about to begin. Another copy is sent to purchasing and is reconciled with the open PO file. A third copy is sent to inventory control and is reconciled with the PO and PR. Another copy is sent to accounts payable and is filed with the purchase order in the accounts payable pending file. The last copy is filed in the receiving department. Accounts payable receives a message from purchasing through the terminal, stating that the invoice has been received. Accounts payable has also received and is temporarily filing the PO and RR. When the message is received through the terminal, the accounts payable clerk, Ivan Pushkin Rodriguez, records the liability and reconciles the information with the PO and RR in the pending file. After Pushkin records the liability, he sends the PO, RR, and invoice to the open accounts file. He also enters the information in the purchases journal and accounts payable subsidiary ledger and then prepares a journal voucher, which is sent to the general ledger department. Upon receipt of the voucher packet from cash disbursements, which states the amount of the check that was disbursed, the accounts payable department then files the voucher packet that recognizes the incurred liability in the closed accounts payable or voucher file. The general ledger department receives a journal voucher from accounts payable and an account summary from inventory control. The general ledger clerk, Ozzie Cratchit, posts and reconciles the journal voucher and account summary and puts this information in the general ledger. The summary and journal voucher are then filed. Cash Disbursements System The cash disbursements process begins with the accounts payable department. Each day, the open accounts payable or voucher file is searched to find items due. Pushkin searches the PR, PO, RR, invoice, and cash disbursement (CD) voucher to find any items that are due and sends these five forms (known as the voucher packet) to cash disbursements. Pudge records the liability due and sends an account summary to the general ledger department. The voucher packet is received by Wally Mayfield, the cash disbursements clerk. Mayfield reviews the documents for completeness and accuracy and then prepares two copies of the check to be disbursed. Mayfield records the dollar amount, the check number, the voucher number, and other relevant information in the check register, which produces a journal voucher to be sent to the general ledger department. The check and voucher packet are sent to the CD treasurer, Bucky Buchanan, for his signature. One copy of the signed check is sent to the supplier, while the other copy is filed in the cash disbursements file. Mayfield then marks the voucher packet as paid and returns it to the accounts payable department to be filed.

CASE REQUIREMENTS

1. Analyze the current system and prepare a document flowchart of the current system for the revenue and expenditure cycles. Use MS Excel. (20 points)

2. Analyze the current system and identify specific internal control problems. Use MS Word.

3. Create Company, record transactions, and print financial statements using MS Office Accounting 2008.

Turn in properly labeled disk (with all group members names) or email with file attachments by the scheduled due date. Triple Play Inc. decides to use MS Office Accounting and you need to record the following business transactions in chronological order.

Event # Date Business Event 1 1/1 Borrowed $20,000 from Mid-State Bank with a short-term note payable. Select Make Deposit from the Banking menu. Type 1/1/2014 as the date. Select Checking as the Deposit in. Select Financial Account at the Type column. At the Account column, select Add a new financial account from the drop-down list and create Short-term Notes Payable (Account type: Current Liability, Account no: 2011, Cash Flow category: Financing, As of: 1/1/2014). Type $20,000 at the Amount column 3 1/1 Purchased office desk from vendor Office Max for $6,000 with a check. Select Write Checks from the Banking menu. Add a new payee (Account type: Vendor, Vendor name: Office Max, Address: 25 Janet Dr. Savannah, GA 31419, Vendor since: 1/1/2014) Type 1/1/2014 as the check date and $6,000 as the check amount. Select Furniture & Fixtures as the item name (estimated with 5 life-years and no salvage value). Type Office Desk as the description. Type $6,000 as the Unit Price. Select Print Checks from the Banking menu. Select Checking as the Account. Select the check box of the check for Office Max (submit the check printed). Select Fixed Asset Manager from the Fixed Assets menu. Click New Fixed Asset. Type Office Desk as the Asset name. Select Furniture or Fixture nonrentals as the Asset class. Select Furniture and Fixtures as the Asset account. Select Depreciation as the Depr./Amortization expense account. Select A/D Furniture & Fixtures as the Accum. Depr./Amortization account. Type $6,000 as the Cost/other basis in the Federal column. 4 1/15 Placed a new Purchase Order of 10 units of First Base Mitt (Add a new item, purchase price: @$100, sales price: @$150) from Nike (Add a new vendor whose address is 1414 Fording Island Rd. Bluffton, SC 29910). 5 1/17 Received 10 units of First Base Mitt and entered a bill of $1,000 from Nike for a previously recorded Purchase Order. 6 1/17 Received a customer order (Sales Order No. 1) and invoiced 5 units of First Base Mitt for at a unit price of $150 plus tax on credit to Cabrillo High School (Add a new customer whose address is 678 El Street, Redmond, WA 11052). 7 1/17 Placed a new Purchase Order of 20 units of Pitchers Glove (Add a new item, purchase price: @$150, sales price: @$200) from Wilson Sporting Goods (Add a new vendor whose address is 8750 W Bryn Mawr Ave. Chicago, IL 60631). 8 1/18 Received 20 units of Pitchers Glove and entered a bill of $3,000 from Wilson Sporting Goods for a previously recorded Purchase Order. 9 1/22 Received $400 check as a payment on account from Cabrillo High School, which is grouped as undeposited funds. (type Check No. 354 in the reference text box). 10 1/23 Had a customer order (Sales Order No. 2) and invoiced Buena Vista Elementary (whose address is 300 Aldeberan St. Vandenberg Village, CA 93436) for 10 Pitchers Gloves at a unit price of $200. 11 1/23 Received $600 check as a payment on account (its Check No. 0933) from Buena Vista Elementary, which is also grouped as undeposited funds. 12 1/24 Wrote checks to pay all bills (Nike and Wilson Sporting Goods) using Checks for a total of $4,000. (This excludes the state sales taxes owed.) 13 1/25 Deposited all previously received but undeposited checks, totaling $1,000, to a Checking account of Mid-State Bank (select the check boxes of the received payments). 14 1/31 Recorded a rent payment of $3,000. Wrote and printed a check to Roland Realty (add a new payee whose address is 901 S. First St. Champaign, IL 61820). 15 1/31 Received the advance payment of $1,500 check made by Arroyo Grande High School (770 Grayson Ave, Savannah, GA 31419) as unearned revenue. Made a deposit into the checking account by adding a new financial account from the drop-down list and create Unearned Revenue account (Account type: Current Liability, Account no: 2012, Cash Flow category: Operating, As of: 1/1/2014). 16 1/31 Recorded depreciation of $600 on furniture and fixtures with Fixed Asset Manager Depreciation Wizard (Depreciation through date: 1/31/2014, edit both of debit and credit amount to $72.80 by double clicking). 17 1/31 Print and submit Profit and Loss (select Custom as the Range and type the date range from 1/1/2014 to 1/31/2014) and Balance Sheet (select Custom as the As of and type the date 1/31/2014).