Case Study: Anderson, Olds, And Watershed

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| Anderson, Olds, and Watershed, CPAs | Memo-X-1 To: | Darlene Wardlaw | From: | Auditor in Charge of Apollo Shoes, Inc. Anderson, Olds, and Watershed, CPAs | Date: | February 9, 2012 | Re: | Acquisition and Expenditure Cycle | | | Cost of Goods Sold has decreased eight percent since last year. From a review of the minutes of the meeting held on June 30, 2011 it is known that there was a general increase in prices by 10 percent. This was in response to declining sales. Since actual sales of goods have actually been declining the drop in cost of goods sold is expected. Research and Development has been eliminated completely since last year. In the minutes of the meeting on June 30th, Mr. Lancaster said the quality of shoes was too high and people were not buying replacements fast enough. He therefore had Research and Development eliminated that year, and has used the space for a gym. Also in the minutes to the June 30th meeting, telephone and postage expenses are down as expected due to increased use of email.…show more content…
Line of credit has increased to $44 million, which was noted in the minutes to the June 30th email. It is noted that these borrowings were to fund the purchase of a new computer system. There have been no bad debt expenses in the current year. By contrast, there were $1.6 million in bad debts the prior year. Mr. Lancaster has put pressure on his employees not to have any more write offs. This was taken from the minutes of the meeting held on January 5,

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