1. You are the owner of a small retail store. You are considering allowing customers to purchase merchandise using credit cards. Until now, your store accepted only cash and cheques. What forms of analysis do you use to make this decision? (explain the costs and the benefits) (2 Marks)

2. Sandra, Mary and Suzie work for a Dr. Smith who accepts checks as payment and has separated the cash receipts administration like this.:

Sandra opens the envelopes and prepares a list in triplicate of all the $$ received with one copy going to Mary who deposits the receipts (the checks) in the bank). Then Suzie takes her copy of the list and posts them into the accounts using her computerized accounting system.

Once a month the 3 of them go out and have an expensive lunch at the expense of Dr. Smith. Mary signs the back of one of the checks that were received and goes to the bank to cash it. Suzie still posts the payment as Miscellaneous. They feel justified because they are underpaid and figure the Dr. will never know the difference.

1. Who in Dr. Smiths office should be reconciling the bank statement? (1 Mark)

2. Would the bank reconciliation bring the fraud out in the open?(2Marks)

3. What should have been put into place to uncover the scheme? (2 Marks)

4. What other internal controls should Dr. Smith Implement? (2 Marks)

3. What is the importance of a company having proper insurance and bonding its employees. (3 Marks)

4. Sandra Incs Current Assets show the following:

Cash - $25,000

Accounts Receivable $1,000,000

She wants to borrow $150,000 to purchase raw materials at a good price. What can she do to obtain the money quickly? (2 marks)

5. Record the following journal entries during Joes first months of operations: (1 Mark Each)

1. Performed various services for clients on account for $165,0000

2. Collected $80,000 from credit customers

3. Estimated bad debt expense to be $40,000

4. Decided Mary would never pay her account outstanding of $3000

6. Sandra writes an IOU to Joe for services rendered equalling $10,000. She agress that payment will be made in full in 6 months at 10% interest. (1 Mark Each )

1. What would Joes journal entry be to record the transaction

2. How much interest will be payable at the end of 6 moths?