SYSTEM
IMPLEMENTATION AND

TRANSACTION
PROCESSING PROJECT (300 points)

Mary’s SunShine POOL Case

BACKGROUND

The objectives of this project are as follows:

·
To reinforce your learning the AIS concepts presented in class

·
To experience a transaction processing application

·
To see the composition of the fields on different tables, such as the
fields contained in the general ledger table, the accounts receivable table,
etc.

·
To see the advantages of the automated features contained in an
accounting information system, such as the automatic posting of transactions

·
To demonstrate on-line computer controls such as field edits,
reasonableness checks, etc.

·
To see the interfaces between sub-systems and the general ledger and
increase your ability to track information into the financial reports

·
To experience implementing an accounting system

·
To practice project planning with an inflexible deadline

·
To experience an extensive, multi-part project completed as a team.

Assume that
Mary’s Sunshine Pool Incorporated has hired you as a consultant to analyze the
controls in its existing system and to implement a computerized accounting
system. The present accounting system is entirely manual. The new system will
be an accounting software package that runs on a microcomputer.

	Requirement	Points
1.	Prepare a project plan in Gantt chart format showing how you and your partner completed the project	25
2.	Prepare a system flowchart of Mary’s Sunshine Pool Company’s transaction processing under the manual system as described in this handout	50
3.	Perform the company set up and process transactions for the company.	125
4.	Prepare a one-page memo to the company owners suggesting ways to improve their internal controls.	75
	Total task points	275
	50 Participation points to be split between team members

case materials

MARY’S SUNSHINE POOL INCORPORATED

4000 AIS Rocks Blvd.

Anywhere, XX 12345

Federal Tax ID: XXX-XX-XXXX

COMPANY BACKGROUND

Mary’s
Sunshine Pool Incorporated is a merchandising firm that sells various pool
supplies, e.g., chemicals, diving boards, pumps, ladders, poolside furniture,
pool games, floating loungers. At
present, Mary’s Sunshine has a manual accounting system; however, the company
has hired you to implement an accounting program to be used on a personal
computer as of July 1, the beginning of the current fiscal year. Mary and Ed, the stockowners of the company,
have made available to you the balance sheet and data from the subsidiary ledgers
for the fiscal year ended June 30.

As of
June 30, Mary’s Sunshine Pool Company consisted of a showroom and an office in
one building, a distribution center in another building, and five
employees. The employees are: Lauren
Allen, a salesperson at the showroom, Paul Barton and Ernest Callahan,
traveling salesmen, and Fred and Ted Hill, Mary and Ed’s twin sons who work at
the distribution center only during the summer months.

Mary’s
Sunshine Pool Incorporated owns the land, the showroom/office building, the
distribution center building, a delivery truck and two automobiles driven by
the traveling salesmen.

REVENUE TRANSACTION CYCLE

Sales
are made to users of pool supplies. Pool
supplies are displayed and orders for products are taken in the showroom. The traveling salesmen also take orders. The distribution center is located on the
same lot as the showroom/office building.
It is here that the orders are filled and shipped.

Order Processing

All
sales are credit sales, which are subject to the approval of Ed. Ed approves
credit based on his “gut” feeling for each individual case and on the
opinions of his bowling buddies.
Generally, Ed wants to make the sales and few orders are not
approved. In the few cases where Ed does
not approve the credit, he marks his copy of the sales order accordingly. He makes a copy of all of the disapproved
orders and two copies of the approved orders.
He sends one copy of both the approved and disapproved orders and all of
the original orders to Mary. He sends a
copy of the approved orders to the twins so they can fill them.

Mary
prepares a report for each salesperson listing both the sales orders turned
down for credit and the approved sales and sends the reports along with the
marked sales orders to the salespeople.
The salespeople notify customers of disapproved credit and then throw
the reports and disapproved sales orders in their car trunks or
wastebaskets. The salespeople file the
original approved sales orders for later use.
Mary files the copies of the approved orders until a shipping notice is
received. The copies of the disapproved
orders are thrown away.

Shipping

Out of
town orders are shipped common carrier FOB Destination. Recently, Ed had a brief meeting with the
twins about the possibility of sending the bulk of freight shipments through
one common carrier, Iron Rooster Trucking Company. The advantage to Mary’s Sunshine would be a
rebate paid quarterly of up to 15% of freight charges. Based on prior years’ business, this rebate
would total in excess of $15,000 per year.
Without giving this practice much thought, Ed told the twins to begin
using Iron Rooster as much as possible.

The
twins take all of the approved orders, find and box the merchandise and prepare
a bill of lading for the carrier. The
twins send their copy of the sales order marked “shipped” and a copy
of the bill of lading to Mary.

After
an order has been shipped, the twins update the inventory cards to keep an
accurate record of items on hand.

At the
end of the week, all of the inventory cards are reviewed and a weekly inventory
report is prepared.

Accounts Receivable

Mary
matches the sales order marked “shipped” to her copy of the sales
order. She then prepares a two-part
invoice and mails the original to the customer.
She records the sales in the sales journal and the receivables in the
subsidiary ledger. Mary files by date
her copy of the invoice with her copy of the sales order and the shipping
documents.

During
the summer season, Mary’s Sunshine often has difficulty in shipping customer
orders in a timely manner. Supplier
delays in delivery to Mary’s Sunshine and increased volume cause delays in
outgoing shipments. At the end of some
months, Mary prepares and mails customer invoices ahead of actual
shipment. She claims this practice more
closely matches revenues and expenses.
As usual, Mary records the sales in the sales journal and in the
accounts receivable subsidiary ledger.

Customers
are allowed to take a 2% discount if they pay within 10 days of the billing
date; otherwise, the net amount is due in 30 days.

Once
per month, Mary prepares a listing of delinquent customers that she sends to
the salespeople. They are responsible
for collecting the overdue amounts.

Cash Receipts

Mary
opens the mail each day; sorts the cash receipts and the invoices to be paid
and logs them in the appropriate logs.
Mary records the receipts on customers account in the cash receipts
journal and in the accounts receivable subsidiary ledger. After recording all the cash receipts, she
prepares a deposit slip and takes the cash to the bank.

DISBURSEMENT CYCLE

Every
Friday afternoon, the salespeople prepare weekly sales reports from their
copies of the sales orders. They send
the reports to Ed and then refile their sales orders by customer name. Ed reviews the weekly sales reports and the
weekly inventory reports prepared by Fred and Ted. Ed “eyeballs” the numbers, notes
any shortages in inventory, and prepares 3-part purchase orders. He mails the original to the vendor, sends
one to the twins in the distribution center and one copy to Mary.

As
noted above, Fred and Ted have a card file for keeping track of inventory. Each card has a running balance to expedite
the preparation of the weekly inventory reports for Ed. When they receive a copy of a purchase order,
they pull the cards for the item(s) ordered, record the quantity ordered and
the P.O. number, and file the purchase order in numerical order. When the shipment arrives, Fred and Ted pulls
the purchase order to make sure that the items received were the items ordered
and note any back orders on the purchase order.
Then they pull the inventory cards, mark the items received, and prepare
a receiving report that is sent to Mary.

As
noted above, Mary opens the mail and separates and logs the cash receipts and
the invoices to be paid. Invoices are filed in alphabetical order by due
date. Each Thursday, Mary pulls the
invoices that are due that week and types three-part checks. The checks, along with the invoices, are
given to Ed for his approval and signature.
After Ed signs the checks, Mary mails the original, files the second
copy in check number order, and attaches the third copy to the invoice. She then enters the check in the cash
disbursement journal and the accounts payable subsidiary ledger. The third copy of the check and the attached
invoice are filed alphabetically by vendor name.

Payroll

A full service
payroll processing company called Payroll Paid Promptly (PPP) processes
payroll. PPP calculates the payroll,
creates and mails the checks to the employees and remits all payroll taxes and
other withholdings to the appropriate locations. They send Mary a report once per month
reflecting the transactions made on behalf of PPP. Mary prepares a journal entry to reflect the
payroll and updates the general ledger.
PPP charges a fee of 10% of the gross payroll for the payroll
service. Mary prepares the check for
these services once per month.

The employees, who are
paid once a month, are as follows:

Lauren Allen, a salesperson
at the showroom

Paul Barton and Ernest
Callahan, traveling salesmen

Fred and Ted Hill, twins who work at
the distribution center

1)
Project Plan

Determine the tasks that
you will perform to complete the project

a) Determine
how your team will complete the tasks

b) Prepare
a Gantt chart with time and dates indicated

c) Prepare
a final Gantt chart showing when the tasks were competed and how many hours
each task took compared to your planned hours.

Hint: think carefully about how you want to complete the tasks and how much
you trust your partner to get his/her portion of the project done.

2)
Prepare a system flowchart

a) Follow
the flowcharting guidelines in your textbook and as we have discussed in
class.

b) The
final copy of the flowchart should be prepared using flowcharting software or
Microsoft office.

Hint: It is usually the easiest to set up the
flowchart with a page for each entity.

3)
Set up Company and process transactions

a) Configure
Company (Set Up Information)

You need to start by creating a new
company for the business. Read through
the entire case before you start setting up your company.

Note: given that this is a class
project, the company name should be your names.
Complete the company information making up information as you see fit.

The proper date
to start recording the transactions is 7/1.
The fiscal year is 7/1/CY through 06/30/NY.

You will be
establishing the chart of accounts, the vendors, the customers and the
inventory and service products. As part
of your configuration, you need to decide the coding schemes that will be used
for each of these data files. Also, to
save yourself time, carefully set up the “default” information for customers,
vendors, and inventory items.

The company
uses one checking account. The business
has used prenumbered invoices and checks in the past. However, given that they need to purchase new
forms to accommodate the new software they plan to restart their numbering
sequences at 1.

Given the small
size of the company and the lack of available accounting expertise, the company
has decided to outsource payroll to a company specializing in payroll
services. This company provides a
monthly report upon which to base the payroll journal entries.

Further, given
the small size of the company and the lack of systems experience the new system
will be implemented without using e-commerce.

Note: Be very careful working
through the company set up options, this is where you establish how your
company will function. If you get it
wrong to start, it will affect all later transactions and reporting.

b)
Implement a chart of accounts

Packaged software usually comes with several chart
of accounts templates. When setting up
your company, you should select a standard chart of accounts for the industry
and type of product you will be selling.
Then go through the chart of accounts and modify it to suit this
business. After you have modified the
accounts, use the balance sheet provided in Appendix A to load the beginning
balances using a Journal entry.

c)
Load beginning balances

You also need
to set up the account balances for the customers, vendors and inventory. The appropriate balances are given in the
subsidiary ledgers for customers (Appendix B), vendors (Appendix C), and
inventory products (Appendix D).

Inventory

Inventory items are
shown in appendix D. The company would
like to use the perpetual weighted average cost method to value inventory. There are two applicable price levels for the
company: normal pricing and governmental pricing (the government entities get a
2% discount).

Note: Set up your
price levels (discounts) before you set up your customers.

Customers

Note: Before you set up your
customers and vendors, go in and set the defaults, the software will then
pre-fill the default values for certain fields.

Terms are 2/10,
net 30. All products are subject to
state sales tax. The state sales tax
rate is 5%. The open invoice method is
used for all customers. Governmental
customers get a preferred price (2% discount).
In addition, Governmental customers do not pay sales tax. The ship-to and billing address are the same
for all the customers. You should assume
some reasonable information for any data fields that you feel are critical, but
for which information is not provided.
Statements are prepared and sent to each customer at the end of each
month.

APPENDIX
B provides information for the customer subledgers.

Vendors

The only trade accounts
payable with outstanding balances at this time are shown in APPENDIX C. The credit terms for all trade creditors are
Net 30 and all product purchases are exempt from sales tax. You should assume some reasonable information
for the required fields. Additional
vendors will be established as invoices are received for payment.

4)
Process transactions

Record the transactions for Mary’s Sunshine
listed on the transaction list for July (See Appendix E)

5)
Analyze controls

Prepare a one-page
memo to Mary’s Sunshine’s proprietor summarizing your opinions on
their controls and suggest ideas for improving the controls. Also consider controls they made need given
the move from a manual to a computerized system.

Hint: use memo format (to:, from:, subject:,
etc.). Remember memos must be easy to
read. Grammar counts.

Hint: Prepare the flowchart
prior to completing the controls memo.

6)
Prepare package to show your work

Prepare
the documentation package of items listed in Appendix G.

7)
Complete the team point distribution on D2L

a) You have 50 points to distribute between yourself
and your partner. If you worked on the
project equally then you do not have to complete the point distribution
form. Each of you will receive 25
points.

b) If you believe you and your partner did not work
equally then complete the form as you see fit.
I will average you and your partners’ points and add them to your
task points

(1) For
example, if you believe you did the majority of the work then give yourself 50
and your partner 0. If your partner
believes that you worked equally and splits the points 25/25, then you will
receive 37.5 participation points and your partner will receive 12.5
participation points.

8)
Grading

The
project will be evaluated using the grading sheet shown in Appendix H.

Appendix A

MARY’S SUNSHINE POOL INCORPORATED

BALANCE SHEET

June 30 (YEAR OF AUTOMATION)

Assets
Current Assets
	Cash	$84,429.00
Accounts Receivable	$83,983.00
Less: Allow. Dbtful Accts	$(1,152.00)
Merchandise Inventory	$54,629.00
Office Supplies	$640.00
Prepaid Insurance	$1,650.00
Total Current Assets	$224,179.00
Property and Equipment
	Land	$25,000.00
Buildings	$140,000.00
Less: Accum. Depr.	$(28,000.00)
Office Equipment	$15,570.00
Less: Accum. Depr.	$(11,720.00)
Vehicles	$42,100.00
Less: Accum. Depr.	$(16,300.00)
Total Property and Equipment	$166,650.00
Total Assets	$390,829.00
Liabilities & Owner’s Equity
Current Liabilities
	Accounts Payable	$30,300.00
Note Payable	$50,000.00
Mortgage Note Payable (current portion)	$7,000.00
Total Current Liabilities	$87,300.00
Long-Term Liabilities
	Mortgage Note Payable	$82,000.00
Total Liabilities	$169,300.00
Stockholder’s Equity
	Common Stock	$221,529.00
Total Liabilities and Owner’s Equity	$390,829.00

Appendix B

MARY’S SUNSHINE POOL INCORPORATED

ACCOUNTS RECEIVABLE

DATA FROM SUBSIDIARY LEDGER

JUNE 30 (YEAR OF AUTOMATION)

Customer	Invoice number	Date	Balance
Hill Township	2288	5/1/PRYR	$7,474.00
Cobb YMCA	2438	5/15/PRYR	$6,900.00
Girl’s Camp	2440	5/21/PRYR	$7,836.00
Valley and Hill Park	2446	5/31/PRYR	$5,000.00
Cobb County Parks and Recreation	2450	6/1/PRYR	$2,863.00
Workout Pool and Spa	2525	6/5/PRYR	$5,700.00
Marietta City School System	2526	6/6/PRYR	$8,316.00
Hill and Dell Housing Development	2598	6/8/PRYR	$7,516.00
Park for Kids and Adults	2621	6/10/PRYR	$3,500.00
WatershipDown Township	2651	6/15/PRYR	$4,881.00
Chumming YWCA	2655	6/21/PRYR	$7,296.00
Forsyth County School System	2662	6/22/PRYR	$5,064.00
Cobb Community College	2777	6/25/PRYR	$6,137.00
Fulton County Parks and Recreation	2788	6/26/PRYR	$2,300.00
Water Park Resorts	2790	6/30/PRYR	$3,200.00
TOTAL ACCOUNTS RECEIVABLE			$83,983.00

Terms
are 2/10, net/30 for all customers

Aside: Add appropriate data such as an address and
phone number for the first 3 customers.

.

Appendix c

MARY’S SUNSHINE POOL INCORPORATED

ACCOUNTS PAYABLE

DATA FROM SUBSIDIARY LEDGER

JUNE 30 (YEAR OF AUTOMATION)

Vendor	Invoice number	Invoice Date	Balance
Fennell Chemicals	Yf462	06/15/XX	$ 8,900.00
Major Pool Supply	719	06/02/XX	$ 2,300.00
Alcoa Auto	877889	06/10/XX	$ 400.00
Alcoa Electric	P55227	06/20/XX	$ 3,300.00
Kennesaw Supply	94387	06/15/XX	$ 2,600.00
Township Service	S7788	06/08/XX	$ 400.00
Jay & Jay Parts	12345	06/30/XX	$ 1,200.00
John’s Supply	Kkvv1	06/30/XX	$ 6,200.00
Cool Pool Supplies	Cool167	06/08/XX	$ 3,400.00
Alcoa Service	Yy21	06/30/XX	$ 1,600.00
TOTAL ACCOUNTS PAYABLE			$30,300.00

Aside: Add appropriate data such as an address and
phone number for the first 3 vendors.

Appendix d

MARY’S SUNSHINE POOL INCORPORATED

INVENTORY

DATA FROM SUBSIDIARY LEDGER

JUNE 30 (YEAR OF AUTOMATION)

Item	Preferred Vendor	Quantity on Hand	ROP[1]	ROQ[2]	Avg. Unit Cost	Unit Sales Price	Total
Chem. Pool treatment	Fennell Chemicals	25,000 lbs	500	1000	$0.80	$2.00	$20,000.00
16’x20’x8′ vinyl liner	Major Pool Supply	8 ea	5	10	$325.00	$750.00	$2,600.00
24’x20’x10′ liner	Major Pool Supply	4 ea	2	4	$400.00	$800.00	$1,600.00
8′ diving board	Major Pool Supply	13 ea	5	5	$98.00	$200.00	$1,274.00
16′ pool rope	Major Pool Supply	50 ea	5	10	$25.00	$50.00	$1,250.00
20′ pool rope	Major Pool Supply	65 ea	15	10	$30.00	$60.00	$1,950.00
Poolside lounger	Cool Pool Supplies	14 ea	10	10	$40.00	$100.00	$560.00
Table w/umbrella	Cool Pool Supplies	40 ea	20	20	$525.00	$800.00	$21,000.00
Water volleyball sets	Cool Pool Supplies	20 ea	5	10	$18.75	$30.00	$375.00
Pump valves	Alcoa Service	1,005 ea	50	100	$4.00	$8.00	$4,020.00
TOTAL INVENTORY							$54,629.00

APPENDIX E

TRANSACTIONS LIST

Purchases/Cash Disbursements

July 1,
Created a purchase order for 170 Poolside loungers for
$37.50, 100 Tables with umbrellas for $500.00 and 40 Water volleyball sets for
$15.00.

July 1,
Created a purchase order for 15 16’x20’x8′ vinyl liners
for $300.00, 25 24’x20’x10′ liners for $390.00, 20 8′ diving boards for $90,
100 16′ pool ropes for $20.00 and 50 20′ pool ropes for $25.00

July 3,
Record the purchase of the new computer system. It was purchased at Computer World for $4,840.23
including sales tax. This amount should be charged to a Computer Equipment
account. $840.23 is paid on delivery and
a no interest note is signed for two installments one on 12/31/ CRYR and the
second 12/31, a year later.

July 6,
Received goods from Cool Pool as ordered on July 1.

July 7,
Received goods from Major Pool as ordered on July 1.

July 14,
Created a purchase order for 40 long pool ropes @$30.00
and 40 short pool ropes @$25.00.

July 21,
Prepared checks for the following bills:

Invoice Number	Account	Vendor	Amount
WS500	Water and Sewage	City Overchargers	291.50
BSM 541	Mobile phone bill	Mobilerus	120.45
49800	Telephone	Independent Bell	139.51
U122	Utilities	GA Utilities	210.65
7888	Freight Expense	Iron Rooster	3270.25

July 22,
Created a purchase order for 125 Tables with umbrellas
at $480 and 25 poolside loungers at $35.

July 23,
Received goods from Major Pool as ordered on July 14

July 26,
Received goods from Cool Pool as ordered on July 22.

July 31,
Record payroll (for July 31). See report from PPP (Appendix F)

July 31,
Pay PPP for payroll services at 10% of gross salaries.

Sales/Cash Receipts

July 2,
Sold 30 16′ pool ropes, 1 diving board, 35 tables with
umbrellas and 2 water volleyball sets to Hill Township at list price.

July 3,
Sold 2000 lbs Chem. Pool treatment, 1 16’x20’x8′ vinyl
liner and 45 Pump valves to Water Park Resorts at list price

July 3,
Sold 2 8′ diving boards, 36 20′ pool ropes, 10 Poolside
loungers, 4 Tables w/umbrellas and 3 Water volleyball sets to Fulton County
Parks and Recreation at 2% discount from list price.

July 7,
Sold 1000 lbs Chem. Pool treatment to Cobb County Parks
and Recreation at 2% less than list price.

July 8,
Sold 1 24’x20’x10′ liners, 2 8′ diving boards, 30 16′
pool ropes and 20 Pump valves at list to Park for Kids and adults.

July 9,
Sold 1 8′ diving board, 20 20′ pool ropes, 30 Poolside
loungers, 20 Tables w/umbrellas and 2 Water volleyball sets to Hill and Del