The following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs,
Question:
The following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs, list the journal entries you think Rite-Aid would have used to do what is described here. You will have to make an educated guess as to what journal entries the company would use to cover up the fraud.
Rite Aid often received payment from customer insurancecarriers whether or not the customers actually picked up medication orderedby telephone. Beginning in 1997, a member of Rite Aid's accounting staff recorded a "will-call" account payable that represented the total amount of payments received from private insurance carriers for prescriptionorders never picked up by customers. Rite Aid reversed the $6.6 million will-call accounts payable in the fourth quarter of FY 99 withoutsufficient justification or basis, and in violation of GAAP.
When the accounting department employee responsible for will-call payables found out about this reversal, he told Rite Aid's general counsel, who agreed that the reversal was inappropriate and directed thatthese payables be reinstated on Rite Aid's books. Bergonzi had little choice but to order the accrual reinstated. He then directed that improper off-setting entries be recorded in the general ledger in a different account,which achieved the same improper effect as had the original reversal.
Project Management A Managerial Approach
ISBN: 978-0470226216
7th Edition
Authors: Jack R. Meredith, Samuel J. Mantel,