In an annual audit at December 31, 2013, you find the followingtransactions near the closing date:1. Merchandise costing $625 was received on December 28, 2013, and the invoice wasnot recorded. You located it in the hands of the purchasing agent; it was marked“on consignment.”2. A packing case containing products costing $816 was standing in the shipping roomwhen the physical inventory was taken. It was not included in the inventory becauseit was marked “Hold for shipping instructions.” Your investigation revealed that thecustomer’s order was dated December 18, 2013, but that the case was shipped and thecustomer billed on January 10, 2014. The product was a stock item of your client.3. Merchandise received on January 6, 2014, costing $720 was entered in the acquisitionsjournal on January 7, 2014. The invoice showed shipment was made FOB supplier’swarehouse on December 31, 2013. Because it was not on hand December 31, it wasnot included in inventory.4. Merchandise costing $1,822 was received on January 3, 2014, and the relatedacquisition invoice recorded January 5. The invoice showed the shipment was madeon December 29, 2013, FOB destination.5. A special machine, fabricated to order for a customer, was finished and in theshipping room on December 31, 2013. The customer was billed on that date andthe machine excluded from inventory, although it was shipped on January 4, 2014.Assume that each of the amounts is material.a. State whether the merchandise should be included in the client’s inventory.b. Give your reason for your decision on each item.*

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

In an annual audit at December 31, 2013, you find the following
transactions near the closing date:
1. Merchandise costing $625 was received on December 28, 2013, and the invoice was
not recorded. You located it in the hands of the purchasing agent; it was marked
“on consignment.”
2. A packing case containing products costing $816 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 that the
customer’s order was dated December 18, 2013, but that the case was shipped and the
customer billed on January 10, 2014. The product was a stock item of your client.
3. Merchandise received on January 6, 2014, costing $720 was entered in the acquisitions
journal on January 7, 2014. The invoice showed shipment was made FOB supplier’s
warehouse on December 31, 2013. Because it was not on hand December 31, it was
not included in inventory.
4. Merchandise costing $1,822 was received on January 3, 2014, and the related
acquisition invoice recorded January 5. The invoice showed the shipment was made
on December 29, 2013, FOB destination.
5. A special machine, fabricated to order for a customer, was finished and in the
shipping room on December 31, 2013. The customer was billed on that date and
the machine excluded from inventory, although it was shipped on January 4, 2014.
Assume that each of the amounts is material.
a. State whether the merchandise should be included in the client’s inventory.
b. Give your reason for your decision on each item.*

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Audit Report
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education