Question $10(8$ points$)$

Cut$-$off testing, Chapter $10,$ Zhang, $10-52$

In addition to confirming accounts receivable at Seven Guys Catering, you are also

concerned about the cut$-$off assertion for cash, accounts receivable, revenue, cost of

sales and accounts payable at SG as of year$-$end $12/31/2023.$ Accounts receivable

relates to delivery of food to customers. All sales to customers are on credit. SG

invoices its customers at the time of delivery and receives cash payments from

customers in about $30$ days.

Delivery schedule obtained from the Production Department:

Deposit tickets $($which match the bank statements$)$ reveal that actual cash receipts from customers for this time period were:

General Ledger, $12/31/2023$

Using the information provided with the delivery schedule and the deposit tickets, determine if there are problems with

the cut$-$off of recognition of revenue for SG Catering. The general ledger is provided in T$-$Account form.

Yes, overstatement of $$11,000$

What effect $($amount$),$ if

any, of error$($s$)$s on

Yes, understatement of $$21,000$

$2023$ operating income?

Is there a cut$-$off error in

Yes, understatement of $$9,000$

expense $($cost of sales$)?$

Yes, understatement of $$12,000$

Is there a cut$-$off error in

cash receipts?

Yes, overstatement of $$21,000$

Is there a cut$-$off error in

revenue?

No$,$ the amount is correct. There is

$$0($zero$)$ over or understatement.

Yes, overstatement of $$9,000$