Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 24QRA
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When tracing using the cutoff information from the December 31 inventory count of Thermo-Tempur Mattresses, you note the following information:
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The documentation indicates that the last receiving report included in the inventory count was Receiving Report 1182. Receiving Reports 1183 and 1184 were for goods received on the company’s truck but not unloaded. Receiving report 1185 was for goods received on January 3.Required:Prepare a correcting journal entry assuming that Thermo-Tempur uses (a) a periodic inventory system and (b) a perpetual inventory system that was updated for the inventory count.
Your review of Mine Company's inventory and related records for the year revealed the following information:Inventory, 1/1 - 450,000Purchases -3,150,000Sales -4,200,000You conducted a physical inventory on December 31 and determined P450,000 was in the company's warehouse. The management suspects some new employees may have pilfered a portion of the merchandise inventory.What is the cost of the missing inventory assuming that Mine's gross profit remains at 30% of sales?
dA clerk in the accounting department periodically reviews the inventory records in Dorder to determine which items need reordering. When she notes that the quantity on hand has fallen below a pre-established reorder point, she prepares a
prenumbered purchase requisition in two copies. One copy f the PR is placed in a chronological file until the matching purchase order is received. The original PR is sent to the purchasing department, where a buyer (1) decides on a suitable supplier
by reference to a supplier list and (2) prepares a prenumbered purchase order in four copies. The original copy of the purchase order is signed by the purchasing manager and mailed to the designated supplier. The second copy of the PO is returned
to the inventory clerk in the accounting department, who (a) pulls the matching second copy of the PR from the temporary file (where it had been filed chronologically), (b) posts the ordered quantities to the inventory records, and (c) files the
purchase…
Chapter 12 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 12 - Prob. 1RQCh. 12 - Explain the significance of the purchase order to...Ch. 12 - What segregation of duties would you recommend to...Ch. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - When perpetual inventory records are maintained,...
Ch. 12 - What is meant by a bill and hold scheme?Ch. 12 - What charges and credits may be disclosed in the...Ch. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - A well-prepared balance sheet usually includes a...Ch. 12 - Darnell Equipment Company uses the LIFO method of...Ch. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 20RQCh. 12 - Prob. 21QRACh. 12 - Prob. 22QRACh. 12 - Prob. 23QRACh. 12 - Prob. 24QRACh. 12 - Prob. 25QRACh. 12 - Prob. 26QRACh. 12 - Prob. 27QRACh. 12 - Grandview Manufacturing Company employs standard...Ch. 12 - Prob. 29AOQCh. 12 - Prob. 29BOQCh. 12 - The document issued by a common carrier...Ch. 12 - Which of the following should be included as a...Ch. 12 - Prob. 29EOQCh. 12 - Prob. 29FOQCh. 12 - Instead of taking a physical inventory count on...Ch. 12 - Prob. 29HOQCh. 12 - Prob. 29IOQCh. 12 - Prob. 29JOQCh. 12 - Prob. 29KOQCh. 12 - Prob. 29LOQCh. 12 - Prob. 30OQCh. 12 - Adapted AICPA Task-Based Simulation For each of...Ch. 12 - Prob. 32OQCh. 12 - Prob. 33OQCh. 12 - Prob. 34AOQCh. 12 - Prob. 34BOQCh. 12 - Prob. 34COQCh. 12 - Prob. 34DOQCh. 12 - Prob. 34EOQCh. 12 - Prob. 35OQCh. 12 - Prob. 36PCh. 12 - Prob. 37PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 41PCh. 12 - Prob. 42PCh. 12 - Prob. 43ITCCh. 12 - Prob. 44ECCh. 12 - Western Trading Company is a sole proprietorship...
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- PROBLEM 5: In connection with your audit of VVV Manufacturing Company, you reviewedits inventory as of December 31, 2020 and found the following items: A. A packing case containing a product costing P100,000 was standing in the shippingroom when the physical inventory was taken. It was not included in the inventorybecause it was marked “Hold for Shipping Instructions”. The customer’s order was dated December 18 but the case was shipped and the customer billed on January 10, 2021. B. Merchandise costing P600,000 was received on December 28, 2020 and the invoicewas recorded. The invoice was in the hands of the purchasing agents and it was marked, “On Consignment”. C. Merchandise received on January 6, 2021, costing P700,000 was entered in thepurchase register on January 7. The invoice showed shipment was made FOB shippingpoint on December 31, 2020. Because it was not on hand during the inventory count, it was not included. D. Merchandise costing P200,000 was received on January 6,…arrow_forwardThe following misstatements are included in the inventory and related records of Westbox Manufacturing Company: 1.When raw material acquisitions were recorded, the improper unit price was included in the perpetual inventory master file. Therefore, the inventory valuation was misstated because the physical inventory was priced by referring to the perpetual records. 2.In taking the physical inventory, the last shipments for the day were excluded from inventory and were not included as a sale until the subsequent year. 3.The clerk in charge of the perpetual inventory master file altered the quantity on an inventory tag to cover up the shortage of inventory caused by its theft during the year. 4.After the auditor left the premises, several inventory tags were lost and were not included in the final inventory summary. 5.During the physical count, several obsolete inventory items were included. 6.Because of a significant increase in volume during the current year and excellent control over…arrow_forwardAssume that in an annual audit of Wildhorse Inc. at December 31, 2025, you find the following transactions near the closing date. Assuming that each of the amounts is material, state whether the merchandise should be included in the client's inventory. 1. 2. 3. 4. 5. Transactions A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on December 31, 2025. The customer was billed on that date and the machine excluded from inventory although it was shipped on January 4, 2026. Merchandise costing $5,880 was received on January 3, 2026, and the related purchase invoice recorded January 5. The invoice showed the shipment was made on December 29, 2025, f.o.b. destination. A packing case containing a product costing $7,140 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked "Hold for shipping instructions." Your investigation revealed…arrow_forward
- Audit Procedures 1. Select a sample of inventory items in the factory warehouse and trace each item to the inventory count sheets to determine whether it has been included and whether the quantity and description are correct. 2. Trace selected quantities from the inventory list to the physical inventory to make sure that it exists and the quantities are the same. 3. Compare the quantities on hand and unit prices on this year's inventory count sheets with those in the preceding year as a test for large differences. 4. Read the footnote disclosures related to the company's accounting policies for valu- ing inventory to make sure the information provided correctly reflects the method used to value inventory. 5. Test the extension of unit prices times quantity on the inventory list for a sample of inventory items, test foot the list, and compare the total to the general ledger. that 6. Send letters directly to third parties who hold the client's inventory, and request they respond directly…arrow_forwardItems Included in Inventory The following are several items that Golosow Companys controller has questioned regarding their inclusion in inventory: a. An invoice has been received for goods ordered. The goods were shipped FOB destination but have not been received. b. Purchases have been ordered and received (shipping terms were FOB destination), but no invoice has arrived. c. Product was shipped to a customer today, FOB destination, and the invoice mailed. d. Purchases are in the receiving department, but they are damaged and will be returned. e. Product is in the shipping department, and the invoice has not been mailed to the customer. Shipping terms are FOB shipping point. f. Golosow has inventory in its possession from Tate Company. The inventory is to be sold by Golosow under a consignment arrangement with Tate. Required: 1. For each of the preceding items, indicate whether Golosow should include them in inventory. Justify your answer. 2. Next Level Describe the basic criterion for including items in inventory.arrow_forwardThe company just took a physical count of inventory and found $75 worth of inventory was unaccounted for. It was either stolen or damaged. Which journal would the company use to record the correction of the error in inventory? A. sales journal B. purchases journal C. cash receipts journal D. cash disbursements journal E. general journalarrow_forward
- The Ogale Equipment Corporation maintains a general ledger account for each class of inventory, debiting the individual accounts for increases during the period and crediting them for decreases. The transactions that follow are for the Raw Materials inventory account, which is debited for materials purchased and credited for materials requisitioned for use. 1. 2. 3. 4. 5. 6. 7. An invoice for $8,100, terms f.o.b. destination, was received and entered on January 2, 2021. The receiving report shows that the materials were received on December 28, 2020. Materials costing $7,300 were returned to the supplier on December 29, 2020, on f.o.b. shipping point terms. The returns were entered into Ogale's general ledger on December 28, even though the returned items did not arrive at the vendor's office until January 6, 2021. Materials costing $28,000, shipped f.o.b. destination, were not entered by December 31, 2020, because they were in a railroad car on the company's siding on that date and…arrow_forwardTracing the Inventory Count. You have been assigned to trace the results of the observation of Brightware China’s physical inventory count to its pricing and compilation. You note the following conditions.1. The last inventory tag documented by Mark Hulse, the auditor who observed the inventory, was 1732, but you notice a number of items with count ticket numbers higher than 1732. You contact the client’s controller, Marcia Vines, who tells you the client found a storage room full of a new product that Brightware had just produced and added it to the inventory. 2. The count tickets recorded by Hulse agree to the inventory list, but some of the other count tickets you select are substantially different from it. Vines tells you these are input errors and she will have them corrected. 3. Hulse described several boxes of goods as being dusty and even broken. They are included in the inventory at cost. Vines’s explanation is that china never “goes bad” and the goods themselves were not…arrow_forwardCAATs Application: Inventory. Your client, Boos & Becker Inc., is a medium-size manufacturer of products for the leisure-time activities market (camping equipment, scuba gear, bows and arrows, and the like). During the past year, a computer system was installed, and inventory records of finished goods and parts were converted to computerized processing.Each record of the inventory master file contains the following information:Item or part number.Description.Size.Quantity on hand.Cost per unit.Total value of inventory on hand at cost.Date of last sale or usage.Quantity used or sold this year.Reorder point (quantity).Economic order quantity.Code number of major vendor or code number of secondary vendor.In preparation for year-end inventory, the client has two identical sets of preprinted inventory cards prepared from the master file. One set is for the client’s inventory counts, and the other is for your use to make audit test counts. The following information has been included on…arrow_forward
- 24. Cable Company reviewed its year-end inventory and found the following items: A. A package containing a product costing P81,600 was standing in the shipping area when the physical inventory was conducted. This was not included in the inventory because it was marked "Hold for shipping instructions The purchase order was dated December 19 but the package was shipped and the customer was billed January 2, 2021 B. A special machine, fabricated to order for a particular customer, was finished and in the shipping room on December 30, 2020. The customer, was billed on that date and the machine was excluded in the inventory. The machine costing P230.000 was shipped January 2, 2021 C Merchandise costing P23,500 was received on January 5, 2021 and the related purchase invoice was recorded January 5, 2021. The invoice showed the shipment was made December 29, 2020. FOB destination. D. Goods costing P150,000 were sold and delivered on December 20, 2020. The sale was accompanied by a repurchase…arrow_forwardCompute for the correct amount of inventory. Johnnie Walker Company provided the following data at year-end: Items counted in the warehouse (including P50,000 damaged and unsalable goods) Special order items included in the count specifically segregated per sale contract Goods held on consignment, included in count Items in the receiving department, returned by customer in good condition Items ordered and in the receiving department Items ordered; invoice received but goods not received. Freight is on account of seller 1 P4,050,000 2 100,000 3 250,000 50,000 400,000 300,000 Items ordered; invoice received but goods not received. Freight is on account of buyer Items shipped today, invoice mailed, FOB shipping point Items shipped today, invoice mailed, FOB destination Goods out on consignment at sales price, cost P150,000 Items currently being used for window display 7 240,000 8 250,000 150,000 10 200,000 11 200,000 12 Items on counterfor sale 800,000 Items in receiving department,…arrow_forward19.Your review of ABC Company's inventory and related records for the year revealed the following information:Inventory, 1/1 - 450,000Purchases -3,150,000Sales -4,200,000You conducted a physical inventory on December 31 and determined P450,000 was in the company's warehouse. The management suspects some new employees may have pilfered a portion of the merchandise inventory.What is the cost of the missing inventory assuming that ABC's gross profit remains at 30% of sales?arrow_forward
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