Problem 6-5 in the text found on page 318: (13 points)
Internal Control (LO 3, 4)
1. Morris Mart suffers from a lack of segregation of duties. Mary handles all tasks associated with collection of customer accounts.

2. Mary should not handle all aspects of accounts receivable, billing, and collection. Two different employees should mail invoices and record the amounts billed. Two employees should be present when the mail is opened. Another employee should be responsible for recording collections from customers. Finally, all employees should be required to take vacations, and there should be rotation of job duties among employees.

3. Someone should explain to Mary that she personally is not the problem but that a good system of internal control requires certain changes to be made. This could be explained to her not in the context of fraud but rather in the context of the necessity to verify and check the work performed by all employees.

Problem 7-3 in the text found on page 355 (13 points) Accounts Receivable Turnover for Coca-Cola and PepsiCo (LO 2)

1. Accounts receivable turnover ratios: Coca-Cola: $24,088/[($2,587 + $2,281)/2] = $24,088/$2,434 = 9.90 times

PepsiCo: $35,137/[($3,725 + $3,261)/2] = $35,137/$3,493 = 10.06 times

2. Average collection period: Coca-Cola: 360/9.90 = 36.36 days

PepsiCo: 360/10.06 = 35.78 days

Both companies have an average collection period of about 36 days. A collection period that averages just over one month, appears to be reasonable.

3. The turnover ratios and the average collection periods are very similar for the two companies. It would be especially helpful to measure these statistics, accounts receivable turnover ratio and average collection period, with the same measures for prior years. It would also be helpful to compare these measures with the industry averages.