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    "answer_date_js": "2024-06-28T03:04:58-04:00",
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    "question_id": "4227709",
    "url": "\/study-help\/questions\/whats-happening-to-profits-at-cazenovia-creations-introduction-annually-your-4227709",
    "question_creation_date_js": "2024-06-28T03:04:58-04:00",
    "question_creation_date": "Jun 28, 2024 03:04 AM",
    "meta_title": "[Solved] WHAT'S HAPPENING TO PROFITS AT CAZENOVIA | SolutionInn",
    "meta_description": "Answer of - WHAT'S HAPPENING TO PROFITS AT CAZENOVIA CREATIONS? INTRODUCTION Annually your firm, Smith & Jones, CPAs, come in to p | SolutionInn",
    "meta_keywords": "s,happening,profits,cazenovia,creations,introduction,annually,firm,smith,jones,cpas,prepare",
    "question_title_h1": "WHAT'S HAPPENING TO PROFITS AT CAZENOVIA CREATIONS? INTRODUCTION Annually your firm, Smith & Jones, CPAs, come in to prepare a year end compilation of the",
    "question_title": "WHAT'S HAPPENING TO PROFITS AT CAZENOVIA CREATIONS? INTRODUCTION Annually your firm, Smith",
    "question_title_for_js_snippet": "WHAT'S HAPPENING TO PROFITS AT CAZENOVIA CREATIONS  INTRODUCTION Annually your firm, Smith   Jones, CPAs, come in to prepare a year end compilation of the financial statements and the Sub S corporation tax return for Cazenovia Creations This past year the owner,Meghan McGuire, has become concerned because the sales figures year over year have been growing significantly but net income does not seem to be keeping pace Her best sales quarters are usually around Valentine's Day and the Christmas season  The 2012 Christmas season was particularly good and she had expected a sizeable increase in net income for the year  Meghan has asked for your assistance in determining why the net income for 2012 has not been as good as expected She has provided you with comparative financial statements and transaction data (purchases, sales, and payroll) for the last seven months of 2012 in an Access database  BRIEF HISTORY OF CAZENOVIA CREATIONS Meghan McGuire started selling her jewelry at Craft Shows throughout the Northeast in the 1990's Her desire was to create wearable art that would be timeless and unique As her jewelry became more popular, she started Cazenovia Creations selling hand crafted jewelry from other artisans as well as her own designs Over the next decade, her company grew to become the largest independent seller of hand crafted jewelry in western NY, Ohio, and Pennsylvania As the business grew Meghan found that she no longer had the time to go to Craft Shows but instead needed to concentrate her efforts on managing the business She employed several salesrepresentatives who placed the jewelry in boutique clothing accessory stores located primarily in malls Meghan also hired two people to interface with the existing jewelers as well as to identify potential new craftspeople  Soon Cazenovia Creations was purchasing and placing pottery, blown glass, woven items and woodcrafts  As the business grew Meghan realized she did not want to spend her time on administration She was much happier designing the jewelry that was the backbone of the business In order to return to her creative pursuits, Meghan hired Sylvia Somerset, a retired bookkeeper office manager Sylvia was highly recommended to Meghan by one of Cazenovia Creations' biggest customers Sylvia had retired from her previous position several years ago when her husband had become chronically ill and had decided to return to the workforce just when Meghan was hiring  Over time, Meghan grew to rely on Sylvia and gave her more and more of the day to day responsibilities of running the business Sylvia lived up to her reputation as a reliable employee and often seemed like a wise financial advisor and almost parental figure to Meghan Sylvia was never late or absent and hadn't even taken a vacation in the time she had been with the company  When she was hired, Sylvia recommended to Meghan that they use online banking and a database accounting system with remote access (the tables included in the database are given at the end of the case) In addition to the cost benefits to the company, this step would allow Sylvia to work from home if her husband's illness did not allow him to be alone Meghan agreed that this would be a significant improvement  REVENUE CYCLE Meghan, with Sylvia's assistance, has divided the region into 4 sales territories and has hired representatives to travel to boutique stores throughout the region to sell both Meghan's jewelry and the work of other artisans Because many of these artisans are solo craftspeople they are willing to sell to Cazenovia Creations at a price lower than normal retail in exchange for Cazenovia Creations placing these items in the various boutique stores on their behalf Cazenovia also handles billing and collection, taking the credit risk for these sales  The gross profit on sales varies from a high of 42  to a low of 25  depending upon the product line Based upon the normal product mix the overall gross profit averages between 31 33   Steps in the revenue cycle  The territory sales reps bring samples of Meghan's and the artisans' work with them to the boutique locations and take orders for the various products  Sylvia checks the credit record of the boutique stores, adds new stores if they meet the credit requirements, and approves orders from qualified customers  Sylvia prepares Cazenovia Creations' purchase orders twice a month to go to the craftspeople  The craftspeople ship the products directly to the boutique stores with a copy of the shipping notice going to Sylvia  Sylvia is copied on an electronic receiving report generated by each boutique  Sylvia maintains the inventory records and price files for all items  Sylvia matches the shipping and receiving reports, records the corresponding purchases and sales, and creates invoices  The sales to all boutiques are made with n 30 credit terms  Sylvia follows up with delinquent accounts and determines any bad debt write offs that are necessary  Cazenovia Creations as an entity does not maintain any inventories Instead the sales representatives take orders for the products of the various vendors and then arrange direct shipment from the vendors to the retail customers Because of the direct ship nature of all sales inventory purchases the following entries were made in the previously used manual system (prior to Sylvia converting the records to a database)  Cost of goods soldXXXX Accounts Payable XXXX Accounts ReceivableXXXX Sales  Other Crafts XXXX This accounting is now done in the database system which is summarized to produce the general ledger  Miscellaneous customer and vendor information  Meghan has satisfied her re dedication to jewelry design in two different ways She creates individual high end pieces on a custom commissioned basis (these sales are not accounted for on Cazenovia Creations' books)  These high end custom orders allow her to satisfy her creative aspirations and are reported by Meghan as a sole proprietor In order to appeal to a broader market, she also designs more moderately priced earrings and bracelets Meghan outsources the manufacture of these items to a local workshop (Caporale, Vendor  1453) Caporale mass produces Meghan's creations that the sales representatives market to the boutique stores Since Caporale direct ships the products to the various boutique stores, the accounting is handled in the same manner as for the outside craftspeople  One of the major customers for Cazenovia Creations' products is a chain of 25 mall based boutique stores, MaBou  All of the invoicing for the purchases of the entire chain is processed by the parent company There are currently over 60 total customer stores, including the 25 associated with the MaBou chain  VENDOR FILES Cazenovia Creations has grown substantially every year for the past five years, encompassing four sales territories in the tri state area  Cazenovia rents space at $2,500 per month and incurs operating expenses for Meghan's local workshop and office space for Sylvia and the purchasing agents  There are currently 19 craftspeople that market their products through Cazenovia Creations including Caporale (the vendor which manufactures Meghan's creations)  Cazenovia's purchasing agents determine what products to carry and negotiate pricing and terms of purchase In addition to working with the current craftspeople, the two purchasing agents seek out new craftspeople  The vendor transactions are processed as follows  Sylvia adds new and maintains existing craftspeople vendor records  Sylvia also establishes and maintains the other vendor records for regular operating expenses  Sylvia pays all purchase invoices on a timely basis after matching shipping documents to the receiving reports from the boutique stores  oPayments made on 6 15 2012 pertain to the Accounts Receivable on 5 31 2012, the detail of which is not available  Sylvia pays the operating expense vendors once monthly on varying due dates  PAYROLL SYSTEM Cazenovia's employees include Sylvia, the two purchasing agents, and four sales representatives The sales representatives are often craftspeople themselves who were having a difficult time making ends meet simply from selling their crafts  The sales position enables them to earn extra cash while still pursuing their own creations Meghan has thus been able to hire very knowledgeable representatives at fairly low compensation For 2011 and 2012 each sales representative earned a base pay of $1,600 per month and a 10  commission on sales The purchasing agents also each earn a monthly salary of $1,600 Sylvia earns $2,800 per month All employees utilize the direct deposit system that Sylvia has set up for payroll The sales reps' base pay and the salaries of other employees are paid semimonthly Sales commissions earned are paid electronically on the last day of the month in a separate direct deposit  Payroll transactions are processed as follows  Sylvia maintains all payroll records She adds new employees, maintains pay rates, records terminations, computes the semimonthly payrolls, and calculates and enters the commissions due to the sales representatives  Sylvia is responsible for ensuring that all tax withholdings and liabilities are properly computed and forms are timely filed  TRAVEL EXPENSE REIMBURSEMENTS Cazenovia Creations also reimburses the sales representatives for travel expenses incurredmileage at $ 50 per mile and occasional meals and lodging in the local area when the sales representatives need to come to the home office for updated product training and sampling  Sylvia approves the travel expense requests of the sales reps and reimburses those expenses on a monthly basis  FINANCIAL REPORTING The financial statements are prepared by Sylvia for Meghan's review Meghan originally operated her business as a sole proprietorship and then had elected at the beginning of 2011 to operate as an S corporationMeghan did not take a salary in either 2011 or 2012  For both years, she has taken a monthly distribution of $4,000 from the S corporation  Purchases and sales are recorded on an accrual basis but other operating expenses are recorded on a cash basis  Meghan's workbench, various tools, office furniture and equipment have all been owned for several years and are currently fully depreciated to their remaining salvage values  Cazenovia Creations Income Statements for  Year ending Year ending 12 31 2012 12 31 2011 Sales   Meghan'sProducts $347,111 $321,560 Sales   Other Crafts 1,340,944 1,123,547 Total Sales 1,688,055 1,445,107 Cost of Goods Sold  Meghan's Products 238,695 214,802 Other Crafts 964,647 773,000 Total Cost of Goods Sold 1,203,342 987,802 Gross Profit 484,713 457,304 Operating Expenses  Salary Expense 158,672 148,800 Commission   Sales Reps 164,044 140,175 Payroll Taxes 27,721 26,008 Utility Expense 12,318 11,214 Rent 30,000 30,000 Insurance Expense 2,760 2,660 Travel Expenses 28,258 25,468 Postage and Supplies 1,524 1,426 Advertising 3,725 2,750 Total Operating Expenses 429,022 388,502 Net Income $55,691 $68,803 Cazenovia Creations Statement of Retained Earnings for the Year ended 12 31 2012 Retained Earnings January 1, 2012 $52,582 Add Net Income 55,691 108,273 Less  Distributions to Owner (48,000) Retained Earnings December 31, 2012 $60,273 Cazenovia Creations Balance Sheets As of December 31, 2012 2011 ASSETS Current Assets  Cash $51,410 $72,963 Accounts Receivable 169,959 132,619 Total Current Assets 221,369 205,582 Property   Equipment Furnishingsand Equipment 28,246 28,246 Less Accum  Depreciation (24,246) (24,246) Net Property   Equipment 4,000 4,000 Total Assets $225,369 $209,582 LIABILITIES   STOCKHOLDER'S EQUITY  Current Liabilities Accounts Payable $118,203 $110,555 Payrolltaxes Payable 6,892 6,445 Total Liabilities 125,095 117,000 Stockholder's Equity Common Stock 40,000 40,000 Retained Earnings 60,273 52,582 100,273 92,582 Total Liabilities and Stockholder's Equity $225,369 $209,582 Database Tables Primary keys are underlined Foreign keys are indicated under the attribute name tblChartOfAccounts ActNum Title Norm tblCommissions Month EID Total Commission FICA FedIncTax NetComm FK refers to tblEmployees tblCustEmp CustNum empNum tblCshDisb TransNumber Date Amount Glacct Enum vendNum FK refers to tblChartOfAccounts tblCshReceipts RANum Date Amount GLacct CustAcct FK refers to tblChartOfAccounts FK refers to tblCustomers tblCustomers CNum Cname Street Zip AreaCode Phone FK refers to tblZips tblEmployees EID EFName ELName EAreaCode EPhone EHireDate ETerminationDate EDOB Address Zip Bank Routing BnkAcctNum FK refers to tblZips tblInventory InventoryID Type Description Cost Price Crafter FK refers to tblVendors tblInvoice InvoiceID InvoiceDate CustomerID EID FK refers to tblCustomers FK refers to tblEmployees tblInvoiceLine InventoryID Quantity InvoiceID FK refers to tblInventory FK refers to tblInvoice tblMyBou StoreNum ShipAddress ShipZip MasterAcct AreaCode Phone FK refers to tblZips FK refers to tblCustomers tblMyBouShip ShipStore InvoiceID FK refers to tblInvoice tblPayroll Month PayPeriod EID Salary FICA FedIncTax NetPay FK refers to tblEmployees tblPO Vendor POdate POnum FK refers to tblVendors tblPOline InventoryID Quantity POnum FK refers to tblInventory FK refers to tblPO tblPOshipDate POnum InventoryID Quantity ShipDate InvoiceID FK refers to tblInventory FK refers to tblInvoice tblVendors CrftID CrftName CrftAddress Zip Contact AreaCode Phone BankRouting BnkAcctNum FK refers to tblZips tblZips City State Zip Part 1  In order to determine if Meghan's concerns are valid you must perform vertical and horizontal analysis on the financial statements Changes should be checked to determine if they are consistent with the facts given in the case Any significant inconsistent changes should be flagged for further investigation A change may be significant either because of an absolute dollar amount or percentage  Once you determine which items warrant further investigation, you must consider how those items can be investigated To that end, identify 3 or more possible causes for the changes you have identified For each possible cause indicate how you could verify if it is an actual source of the observed inconsistency  Use the database posted on Sakai to do the followings  create table for each worksheet name each table based on the name of the worksheet develop queries or pivot tables in excel that will help you investigate those items identified in step 1",
    "question_description": "<span>WHAT'S HAPPENING TO PROFITS AT CAZENOVIA CREATIONS?<\/span> <span>INTRODUCTION<\/span><p>Annually your firm, Smith & Jones, CPAs, come in to prepare a year end compilation of the financial statements and the Sub S corporation tax return for Cazenovia Creations.This past year the owner,Meghan McGuire, has become concerned because the sales figures year over year have been growing significantly but net income does not seem to be keeping pace.Her best sales quarters are usually around Valentine's Day and the Christmas season..The 2012 Christmas season was particularly good and she had expected a sizeable increase in net income for the year.<span>Meghan has asked for your assistance in determining why the net income for 2012 has not been as good as expected.She has provided you with comparative financial statements and transaction data (purchases, sales, and payroll) for the last seven months of 2012 in an Access database.<\/span><\/p> <p> <\/p> <span>BRIEF HISTORY OF CAZENOVIA CREATIONS<\/span><p>Meghan McGuire started selling her jewelry at Craft Shows throughout the Northeast in the 1990's.Her desire was to create wearable art that would be timeless and unique.As her jewelry became more popular, she started Cazenovia Creations selling hand crafted jewelry from other artisans as well as her own designs.Over the next decade, her company grew to become the largest independent seller of hand crafted jewelry in western NY, Ohio, and Pennsylvania.As the business grew Meghan found that she no longer had the time to go to Craft Shows but instead needed to concentrate her efforts on managing the business.She employed several salesrepresentatives who placed the jewelry in boutique clothing\/accessory stores located primarily in malls.Meghan also hired two people to interface with the existing jewelers as well as to identify potential new craftspeople..Soon Cazenovia Creations was purchasing and placing pottery, blown glass, woven items and woodcrafts.<\/p> <p>As the business grew Meghan realized she did not want to spend her time on administration.She was much happier designing the jewelry that was the backbone of the business.In order to return to her creative pursuits, Meghan hired Sylvia Somerset, a retired bookkeeper\/office manager.Sylvia was highly recommended to Meghan by one of Cazenovia Creations' biggest customers.Sylvia had retired from her previous position several years ago when her husband had become chronically ill and had decided to return to the workforce just when Meghan was hiring.<\/p> <p>Over time, Meghan grew to rely on Sylvia and gave her more and more of the day to day responsibilities of running the business.Sylvia lived up to her reputation as a reliable employee and often seemed like a wise financial advisor and almost parental figure to Meghan.Sylvia was never late or absent and hadn't even taken a vacation in the time she had been with the company. <\/p> <p>When she was hired, Sylvia recommended to Meghan that they use online banking and a database accounting system with remote access (the tables included in the database are given at the end of the case).In addition to the cost benefits to the company, this step would allow Sylvia to work from home if her husband's illness did not allow him to be alone.Meghan agreed that this would be a significant improvement.<\/p> <span>REVENUE CYCLE<\/span><p>Meghan, with Sylvia's assistance, has divided the region into 4 sales territories and has hired representatives to travel to boutique stores throughout the region to sell both Meghan's jewelry and the work of other artisans.Because many of these artisans are solo craftspeople they are willing to sell to Cazenovia Creations at a price lower than normal retail in exchange for Cazenovia Creations placing these items in the various boutique stores on their behalf.Cazenovia also handles billing and collection, taking the credit risk for these sales.<span>The gross profit on sales varies from a high of 42% to a low of 25% depending upon the product line.Based upon the normal product mix the overall gross profit averages between 31-33%.<\/span> <\/p> <p><strong>Steps in the revenue cycle:<\/strong><\/p> <p>The territory sales reps bring samples of Meghan's and the artisans' work with them to the boutique locations and take orders for the various products.<\/p> <p>Sylvia checks the credit record of the boutique stores, adds new stores if they meet the credit requirements, and approves orders from qualified customers.<\/p> <p>Sylvia prepares Cazenovia Creations' purchase orders twice a month to go to the craftspeople. <\/p> <p>The craftspeople ship the products directly to the boutique stores with a copy of the shipping notice going to Sylvia. <\/p> <p>Sylvia is copied on an electronic receiving report generated by each boutique. <\/p> <p>Sylvia maintains the inventory records and price files for all items.<\/p> <p>Sylvia matches the shipping and receiving reports, records the corresponding purchases and sales, and creates invoices.<\/p> <p>The sales to all boutiques are made with n\/30 credit terms.<\/p> <p>Sylvia follows up with delinquent accounts and determines any bad debt write-offs that are necessary.<\/p> <p> <\/p> <p>Cazenovia Creations as an entity does not maintain any inventories.Instead the sales representatives take orders for the products of the various vendors and then arrange direct shipment from the vendors to the retail customers.Because of the direct ship nature of all sales\/inventory purchases the following entries were made in the previously used manual system (prior to Sylvia converting the records to a database):<\/p> <p>Cost of goods soldXXXX<\/p> <p>Accounts Payable XXXX<\/p> <p>Accounts ReceivableXXXX<\/p> <p> Sales- Other Crafts XXXX<\/p> <p>This accounting is now done in the database system which is summarized to produce the general ledger.<\/p> <p> <\/p> <span>Miscellaneous customer and vendor information:<\/span><p>Meghan has satisfied her re-dedication to jewelry design in two different ways.She creates individual high end pieces on a custom commissioned basis (these sales are not accounted for on Cazenovia Creations' books). These high end custom orders allow her to satisfy her creative aspirations and are reported by Meghan as a sole proprietor.In order to appeal to a broader market, she also designs more moderately priced earrings and bracelets.Meghan outsources the manufacture of these items to a local workshop (Caporale, Vendor #1453).Caporale mass produces Meghan's creations that the sales representatives market to the boutique stores.Since Caporale direct ships the products to the various boutique stores, the accounting is handled in the same manner as for the outside craftspeople. <\/p> <p>One of the major customers for Cazenovia Creations' products is a chain of 25 mall based boutique stores, MaBou..All of the invoicing for the purchases of the entire chain is processed by the parent company.There are currently over 60 total customer stores, including the 25 associated with the MaBou chain.<\/p> <p> <\/p> <span>VENDOR FILES<\/span><p>Cazenovia Creations has grown substantially every year for the past five years, encompassing four sales territories in the tri-state area.<span>Cazenovia rents space at $2,500 per month and incurs operating expenses for Meghan's local workshop and office space for Sylvia and the purchasing agents.<\/span><\/p> <p><span>There are currently 19 craftspeople that market their products through Cazenovia Creations including Caporale<\/span> (the vendor which manufactures Meghan's creations). Cazenovia's purchasing agents determine what products to carry and negotiate pricing and terms of purchase.In addition to working with the current craftspeople, the two purchasing agents seek out new craftspeople.<\/p> <p><strong>The vendor transactions are processed as follows:<\/strong><\/p> <p>Sylvia adds new and maintains existing craftspeople vendor records. <\/p> <p>Sylvia also establishes and maintains the other vendor records for regular operating expenses.<\/p> <p>Sylvia pays all purchase invoices on a timely basis after matching shipping documents to the receiving reports from the boutique stores.<\/p> <p>oPayments made on 6\/15\/2012 pertain to the Accounts Receivable on 5\/31\/2012, the detail of which is not available.<\/p> <p>Sylvia pays the operating expense vendors once monthly on varying due dates.<\/p> <p><\/p> <span>PAYROLL SYSTEM<\/span><p>Cazenovia's employees include Sylvia, the two purchasing agents, and four sales representatives.The sales representatives are often craftspeople themselves who were having a difficult time making ends meet simply from selling their crafts. The sales position enables them to earn extra cash while still pursuing their own creations.Meghan has thus been able to hire very knowledgeable representatives at fairly low compensation.For 2011 and 2012 each sales representative earned a base pay of $1,600 per month and a 10% commission on sales.The purchasing agents also each earn a monthly salary of $1,600.Sylvia earns $2,800 per month.All employees utilize the direct deposit system that Sylvia has set up for payroll.The sales reps' base pay and the salaries of other employees are paid semimonthly.Sales commissions earned are paid electronically on the last day of the month in a separate direct deposit.<strong> <\/strong><\/p> <p><strong>Payroll transactions are processed as follows:<\/strong><\/p> <p>Sylvia maintains all payroll records.She adds new employees, maintains pay rates, records terminations, computes the semimonthly payrolls, and calculates and enters the commissions due to the sales representatives.<\/p> <p>Sylvia is responsible for ensuring that all tax withholdings and liabilities are properly computed and forms are timely filed.<\/p> <p> <\/p> <span>TRAVEL EXPENSE REIMBURSEMENTS<\/span><p>Cazenovia Creations also reimburses the sales representatives for travel expenses incurredmileage at $.50 per mile and occasional meals and lodging in the local area when the sales representatives need to come to the home office for updated product training and sampling.<span>Sylvia approves the travel expense requests of the sales reps and reimburses those expenses on a monthly basis.<\/span><\/p> <p> <\/p> <span>FINANCIAL REPORTING<\/span><p>The financial statements are prepared by Sylvia for Meghan's review.Meghan originally operated her business as a sole proprietorship and then had elected at the beginning of 2011 to operate as an S corporationMeghan did not take a salary in either 2011 or 2012.<span>For both years, she has taken a monthly distribution of $4,000 from the S corporation.<\/span>Purchases and sales are recorded on an accrual basis but other operating expenses are recorded on a cash basis. <span>Meghan's workbench, various tools, office furniture and equipment have all been owned for several years and are currently fully depreciated to their remaining salvage values.<\/span> <\/p> <p> <\/p> <p> <\/p> <p> <\/p> <p> <\/p> <p> <strong>Cazenovia Creations<\/strong><\/p> <p> <strong>Income Statements for:<\/strong><\/p> <p> <strong>Year ending<\/strong><\/p> <p> <strong>Year ending<\/strong><\/p> <p> <strong>12\/31\/2012<\/strong><\/p> <p> <strong>12\/31\/2011<\/strong><\/p> <p> <span>Sales - Meghan'sProducts<\/span><\/p> <p> <span>$347,111 <\/span><\/p> <p> <span>$321,560 <\/span><\/p> <p> <span>Sales - Other Crafts<\/span><\/p> <p> <span>1,340,944 <\/span><\/p> <p> <span>1,123,547 <\/span><\/p> <p> <span>Total Sales<\/span><\/p> <p> <span>1,688,055 <\/span><\/p> <p> <span>1,445,107 <\/span><\/p> <p> <span>Cost of Goods Sold:<\/span><\/p> <p> <span>Meghan's Products<\/span><\/p> <p> <span>238,695 <\/span><\/p> <p> <span>214,802 <\/span><\/p> <p> <span>Other Crafts<\/span><\/p> <p> <span>964,647 <\/span><\/p> <p> <span>773,000 <\/span><\/p> <p> <span>Total Cost of Goods Sold<\/span><\/p> <p> <span>1,203,342 <\/span><\/p> <p> <span>987,802 <\/span><\/p> <p> <span>Gross Profit<\/span><\/p> <p> <span>484,713 <\/span><\/p> <p> <span>457,304 <\/span><\/p> <p> <span>Operating Expenses:<\/span><\/p> <p> <span>Salary Expense<\/span><\/p> <p> <span>158,672 <\/span><\/p> <p> <span>148,800 <\/span><\/p> <p> <span>Commission - Sales Reps<\/span><\/p> <p> <span>164,044 <\/span><\/p> <p> <span>140,175 <\/span><\/p> <p> <span>Payroll Taxes<\/span><\/p> <p> <span>27,721 <\/span><\/p> <p> <span>26,008 <\/span><\/p> <p> <span>Utility Expense<\/span><\/p> <p> <span>12,318 <\/span><\/p> <p> <span>11,214 <\/span><\/p> <p> <span>Rent<\/span><\/p> <p> <span>30,000 <\/span><\/p> <p> <span>30,000 <\/span><\/p> <p> <span>Insurance Expense<\/span><\/p> <p> <span>2,760 <\/span><\/p> <p> <span>2,660 <\/span><\/p> <p> <span>Travel Expenses<\/span><\/p> <p> <span>28,258 <\/span><\/p> <p> <span>25,468 <\/span><\/p> <p> <span>Postage and Supplies <\/span><\/p> <p> <span>1,524 <\/span><\/p> <p> <span>1,426 <\/span><\/p> <p> <span>Advertising<\/span><\/p> <p> <span>3,725 <\/span><\/p> <p> <span>2,750 <\/span><\/p> <p> <span>Total Operating Expenses<\/span><\/p> <p> <span>429,022 <\/span><\/p> <p> <span>388,502 <\/span><\/p> <p> <strong>Net Income<\/strong><\/p> <p> <strong>$55,691 <\/strong><\/p> <p> <strong>$68,803 <\/strong><\/p> <p> <strong>Cazenovia Creations<\/strong><\/p> <p> <strong>Statement of Retained Earnings for<\/strong><\/p> <p> <strong>the Year ended 12\/31\/2012<\/strong><\/p> <p> <span>Retained Earnings January 1, 2012<\/span><\/p> <p> <span>$52,582<\/span><\/p> <p> <span>Add:Net Income<\/span><\/p> <p> <span>55,691<\/span><\/p> <p> <span>108,273<\/span><\/p> <p> <span>Less: Distributions to Owner<\/span><\/p> <p> <span>(48,000)<\/span><\/p> <p> <span>Retained Earnings December 31, 2012<\/span><\/p> <p> <strong>$60,273 <\/strong><\/p> <p> <\/p> <p> <\/p> <p> <strong>Cazenovia Creations<\/strong><\/p> <p> <strong>Balance Sheets<\/strong><\/p> <p> <strong>As of December 31,<\/strong><\/p> <p> <strong>2012<\/strong><\/p> <p> <strong>2011<\/strong><\/p> <p> <strong>ASSETS<\/strong><\/p> <p> <span>Current Assets:<\/span><\/p> <p> <span>Cash<\/span><\/p> <p> <span>$51,410 <\/span><\/p> <p> <span>$72,963 <\/span><\/p> <p> <span>Accounts Receivable <\/span><\/p> <p> <span>169,959 <\/span><\/p> <p> <span>132,619 <\/span><\/p> <p> <span>Total Current Assets<\/span><\/p> <p> <span>221,369 <\/span><\/p> <p> <span>205,582 <\/span><\/p> <p> <span>Property & Equipment<\/span><\/p> <p> <span>Furnishingsand Equipment<\/span><\/p> <p> <span>28,246 <\/span><\/p> <p> <span>28,246 <\/span><\/p> <p> <span>Less:Accum. Depreciation<\/span><\/p> <p> <span>(24,246)<\/span><\/p> <p> <span>(24,246)<\/span><\/p> <p> <span>Net Property & Equipment<\/span><\/p> <p> <span>4,000 <\/span><\/p> <p> <span>4,000 <\/span><\/p> <p> <strong>Total Assets<\/strong><\/p> <p> <strong>$225,369 <\/strong><\/p> <p> <strong>$209,582 <\/strong><\/p> <p> <strong>LIABILITIES & STOCKHOLDER'S EQUITY:<\/strong><\/p> <p> <span>Current Liabilities<\/span><\/p> <p> <span>Accounts Payable<\/span><\/p> <p> <span>$118,203 <\/span><\/p> <p> <span>$110,555 <\/span><\/p> <p> <span>Payrolltaxes Payable<\/span><\/p> <p> <span>6,892 <\/span><\/p> <p> <span>6,445<\/span><\/p> <p> <span>Total Liabilities<\/span><\/p> <p> <span>125,095 <\/span><\/p> <p> <span>117,000<\/span><\/p> <p> <span>Stockholder's Equity<\/span><\/p> <p> <span>Common Stock<\/span><\/p> <p> <span>40,000 <\/span><\/p> <p> <span>40,000 <\/span><\/p> <p> <span>Retained Earnings<\/span><\/p> <p> <span>60,273 <\/span><\/p> <p> <span>52,582 <\/span><\/p> <p> <span>100,273 <\/span><\/p> <p> <span>92,582 <\/span><\/p> <p> <strong>Total Liabilities <\/strong><\/p> <p> <strong>and Stockholder's Equity<\/strong><\/p> <p> <strong>$225,369 <\/strong><\/p> <p> <strong>$209,582 <\/strong><\/p> <p> <\/p> <p> <\/p> <p> <\/p> <p> <\/p> <strong> <\/strong>Database Tables<p>Primary keys are underlined<\/p> <p>Foreign keys are indicated under the attribute name<\/p> <p> <\/p> <p> <strong>tblChartOfAccounts<\/strong><span><\/span><\/p> <p> <u>ActNum<\/u><\/p> <p> <span>Title<\/span><\/p> <p> <span>Norm<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <strong>tblCommissions<\/strong><span><\/span><\/p> <p> <u>Month<\/u><\/p> <p> <u>EID<\/u><\/p> <p> <span>Total<\/span><\/p> <p> <span>Commission<\/span><\/p> <p> <span>FICA<\/span><\/p> <p> <span>FedIncTax<\/span><\/p> <p> <span>NetComm<\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblEmployees<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <strong>tblCustEmp<\/strong><span><\/span><\/p> <p> <span>CustNum<\/span><\/p> <p> <span>empNum<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <strong>tblCshDisb<\/strong><span><\/span><\/p> <p> <u>TransNumber<\/u><\/p> <p> <span>Date<\/span><\/p> <p> <span>Amount<\/span><\/p> <p> <span>Glacct<\/span><\/p> <p> <span>Enum\/vendNum<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblChartOfAccounts<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <strong>tblCshReceipts<\/strong><span><\/span><\/p> <p> <u>RANum<\/u><\/p> <p> <span>Date<\/span><\/p> <p> <span>Amount<\/span><\/p> <p> <span>GLacct<\/span><\/p> <p> <span>CustAcct<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblChartOfAccounts<\/span><\/p> <p> <span>FK refers to tblCustomers<\/span><\/p> <p> <strong>tblCustomers<\/strong><span><\/span><\/p> <p> <u>CNum<\/u><\/p> <p> <span>Cname<\/span><\/p> <p> <span>Street<\/span><\/p> <p> <span>Zip<\/span><\/p> <p> <span>AreaCode<\/span><\/p> <p> <span>Phone<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblZips<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <strong>tblEmployees<\/strong><\/p> <p> <\/p> <p> <u>EID<\/u><\/p> <p> <span>EFName<\/span><\/p> <p> <span>ELName<\/span><\/p> <p> <span>EAreaCode<\/span><\/p> <p> <span>EPhone<\/span><\/p> <p> <span>EHireDate<\/span><\/p> <p> <span>ETerminationDate<\/span><\/p> <p> <span>EDOB<\/span><\/p> <p> <span>Address<\/span><\/p> <p> <span>Zip<\/span><\/p> <p> <span>Bank Routing<\/span><\/p> <p> <span>BnkAcctNum<\/span><\/p> <p> <\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblZips<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <\/p> <p> <strong>tblInventory<\/strong><span><\/span><\/p> <p> <u>InventoryID<\/u><\/p> <p> <span>Type<\/span><\/p> <p> <span>Description<\/span><\/p> <p> <span>Cost<\/span><\/p> <p> <span>Price<\/span><\/p> <p> <span>Crafter<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblVendors<\/span><\/p> <p> <strong>tblInvoice<\/strong><span><\/span><\/p> <p> <u>InvoiceID<\/u><\/p> <p> <span>InvoiceDate<\/span><\/p> <p> <span>CustomerID<\/span><\/p> <p> <span>EID<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblCustomers<\/span><\/p> <p> <span>FK refers to tblEmployees<\/span><\/p> <p> <strong>tblInvoiceLine<\/strong><span><\/span><\/p> <p> <u>InventoryID<\/u><\/p> <p> <span>Quantity<\/span><\/p> <p> <u>InvoiceID<\/u><\/p> <p> <span>FK refers to tblInventory<\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblInvoice<\/span><\/p> <p> <strong>tblMyBou<\/strong><span><\/span><\/p> <p> <u>StoreNum<\/u><\/p> <p> <span>ShipAddress<\/span><\/p> <p> <span>ShipZip<\/span><\/p> <p> <span>MasterAcct<\/span><\/p> <p> <span>AreaCode<\/span><\/p> <p> <span>Phone<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblZips<\/span><\/p> <p> <span>FK refers to tblCustomers<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <\/p> <p> <\/p> <p> <\/p> <p> <span><\/span><\/p> <p> <strong>tblMyBouShip<\/strong><span><\/span><\/p> <p> <span>ShipStore<\/span><\/p> <p> <u>InvoiceID<\/u><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblInvoice<\/span><\/p> <p> <strong>tblPayroll<\/strong><span><\/span><\/p> <p> <u>Month<\/u><\/p> <p> <span>PayPeriod<\/span><\/p> <p> <span>EID<\/span><\/p> <p> <span>Salary<\/span><\/p> <p> <span>FICA<\/span><\/p> <p> <u>FedIncTax<\/u><\/p> <p> <span>NetPay<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblEmployees<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <strong>tblPO<\/strong><span><\/span><\/p> <p> <span>Vendor<\/span><\/p> <p> <span>POdate<\/span><\/p> <p> <u>POnum<\/u><\/p> <p> <span>FK refers to tblVendors<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <strong>tblPOline<\/strong><span><\/span><\/p> <p> <u>InventoryID<\/u><\/p> <p> <span>Quantity<\/span><\/p> <p> <u>POnum<\/u><\/p> <p> <span>FK refers to tblInventory<\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblPO<\/span><\/p> <p> <strong>tblPOshipDate<\/strong><span><\/span><\/p> <p> <span>POnum<\/span><\/p> <p> <u>InventoryID<\/u><\/p> <p> <span>Quantity<\/span><\/p> <p> <span>ShipDate<\/span><\/p> <p> <u>InvoiceID<\/u><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblInventory<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblInvoice<\/span><\/p> <p> <strong>tblVendors<\/strong><span><\/span><\/p> <p> <u>CrftID<\/u><\/p> <p> <span>CrftName<\/span><\/p> <p> <span>CrftAddress<\/span><\/p> <p> <span>Zip<\/span><\/p> <p> <span>Contact<\/span><\/p> <p> <span>AreaCode<\/span><\/p> <p> <span>Phone<\/span><\/p> <p> <span>BankRouting<\/span><\/p> <p> <span>BnkAcctNum<\/span><\/p> <p> <\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span>FK refers to tblZips<\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <span><\/span><\/p> <p> <\/p> <p> <span><\/span><\/p> <p> <strong>tblZips<\/strong><\/p> <p> <span>City<\/span><\/p> <p> <span>State<\/span><\/p> <p> <u>Zip<\/u><\/p> <p> <\/p> <p><span>Part 1: In order to determine if Meghan's concerns are valid you must perform vertical and horizontal analysis on the financial statements.Changes should be checked to determine if they are consistent with the facts given in the case.Any significant inconsistent changes should be flagged for further investigation.A change may be significant either because of an absolute dollar amount or percentage.<\/span><\/p> <p> <\/p> <ol> <li>Once you determine which items warrant further investigation, you must consider how those items can be investigated.To that end, identify 3 or more possible causes for the changes you have identified.For each possible cause indicate how you could verify if it is an actual source of the observed inconsistency.<\/li> <li>Use the database posted on Sakai to do the followings:<\/li> <\/ol> <ul> <li>create table for each worksheet<\/li> <li> <\/li> <li>name each table based on the name of the worksheet<\/li> <li> <\/li> <li>develop queries or pivot tables in excel that will help you investigate those items identified in step 1<\/li> <\/ul>",
    "transcribed_text": "",
    "related_book": {
        "title": "South-Western Federal Taxation 2020 Comprehensive",
        "isbn": "357109147, 978-0357109144",
        "edition": "43rd Edition",
        "authors": "David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman",
        "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/1962.jpg",
        "uri": "\/textbooks\/south-western-federal-taxation-2020-comprehensive-43rd-edition-9780357109144",
        "see_more_uri": ""
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        "edition": "17th Edition"
    },
    "question_posted": "2024-06-28 03:04:58",
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