2. Reading review problem. The chapter discussed how the acquisition/payment process
functions for inventory, but it can also apply to virtually any asset on an organization's
balance sheet. In responding to the following questions, consider KKD's capital
assets, such as buildings and equipment.
a. If a KKD franchise location wants to purchase equipment through the KKD corporate office,
what document would the franchise use? What document would the corporate office use to
buy the equipment from a vendor?
b. What documents would the franchise location need before issuing a check to pay for the
equipment?
c. Suppose a franchise location purchased a piece of equipment with a list price of $25,000;
transportation and testing costs totaled $5,000, and sales tax of 5% was levied on the list
price alone. Create the required journal entry if the franchise location paid 30% of the list
price, all the sales tax and all the transportation and testing costs in cash and financed the
remainder with a 10-month, 6% note payable.
d. Other than document matching prior to issuing a check, what internal controls should the
franchise location have in place with respect to the equipment?
e. Each purchase transaction can involve multiple pieces of equipment, but each piece of
equipment is only purchased one time. What tables should the franchise location maintain
in its relational database for the purchase transaction and the equipment itself? What fields
would each table contain? Indicate primary and foreign keys in the usual way.
