A Manager of One of a Retailer's Several Retail Outlets

question 418

Multiple Choice

A manager of one of a retailer's several retail outlets is stealing cash from cash sales, recording the sales as accounts receivable, and subsequently writing off the fictitious accounts receivable as bad debts. Which of the following comparisons would be most effective in signaling the possibility of such a fraud?

• A) Bad debt expense as a percentage of sales, compared to that of the other outlets.
• B) Bad debt expense as a percentage of sales, compared to that of previous years.
• C) Percentage of past-due accounts receivable, compared to that of the other outlets.
• D) Percentage of past-due accounts receivable, compared to that of previous years.

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Definitions:

Ex-Dividend Date

The specific date on which shares traded no longer come with the right to receive the most recently declared dividend.

Total Wealth

The complete value of an individual's or entity's assets minus liabilities.

Reverse Split

A reduction in the number of a company's shares outstanding that increases the share price proportionately.

Stock Dividend

A stock dividend is a dividend payment made to shareholders in the form of additional shares rather than a cash payout, affecting the shareholder's portion of company ownership but not the total value of ownership.