ABC LLC manufactures and sells paper envelopes. The stock of envelopes was included in the closing inventory as of December 31, 2005, at a cost of $50 each per pack. During the final audit, the auditors noted that the subsequent sale price for the inventory at January 15, 2006, was $40 each per pack. Furthermore, inquiry reveals that during the physical stock take, a water leakage has created damages to the paper and the glue. Accordingly, in the following week, ABC LLC spent a total of $15 per pack for repairing and reapplying glue to the envelopes. The net realizable value and inventory write-down (loss) amount to: (a) $40 and $10 respectively. (b) $45 and $10 respectively. (c) $25 and $25 respectively. (d) $35 and $25 respectively. (e) $30 and $15 respectively.23

ABC LLC manufactures and sells paper envelopes. The stock of envelopes was included in the closing inventory as of December 31, 2005, at a cost of $50 each per pack. During the final audit, the auditors noted that the subsequent sale price for the inventory at January 15, 2006, was $40 each per pack. Furthermore, inquiry reveals that during the physical stock take, a water leakage has created damages to the paper and the glue. Accordingly, in the following week, ABC LLC spent a total of $15 per pack for repairing and reapplying glue to the envelopes. The net realizable value and inventory write-down (loss) amount to: (a) $40 and $10 respectively. (b) $45 and $10 respectively. (c) $25 and $25 respectively. (d) $35 and $25 respectively. (e) $30 and $15 respectively.23

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter4: Professional Liability, Auditor Judgment Frameworks, And Professional Responsibilities

Section: Chapter Questions

Problem 54RSCQ

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