GEN COMBO LL PRINCIPLES OF AUDITING & OTHER ASSURANCE SERVICES; CONNECT AC
21st Edition
ISBN: 9781260427202
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Chapter 12, Problem 24QRA
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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…
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…
Chapter 12 Solutions
GEN COMBO LL PRINCIPLES OF AUDITING & OTHER ASSURANCE SERVICES; CONNECT AC
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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- Tom Pryor is conducting an audit of the computerized inventory system used by Zix Corporation. Tom has inserted hypothetical data into the computer program that tracks inventory on a perpetual basis. Below are the hypotheical data inserted by Tom: Transaction Beginning inventory Purchase, day 1 Sale, day 2 Purchase, day 3. Sale, day 4 Units 10 5 669 Cost per unit $10 $11 $12 The computer program returned the following ending inventory values: FIFO perpetual, $96 LIFO perpetual, $80 Moving average, $88 Which of the three values appears to be incorrect, and what "error" might be causing this condition?arrow_forwardPROBLEM 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_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_forward
- The 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_forwardThe 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_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_forward73. Meadows Company headquarters records all of its branch equipment in its own general ledger. Prepare the journal entries in the home office books and in the branch books as a result of the following transactions: (a) At the beginning of 1986, the branch office purchased branch inventory for $2,500, terms of purchase 2/10, n/30. (b) Head office pays invoices within the discount period. (c) Depreciation on equipment is recorded at the end of the year at a rate of 10%. (d) in earty 1987, the branch's old inventory was exchanged for new inventory for $4,000; A trade-in of $1,500 is received on the old inventory and headquarters pays the balance.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_forward
- 19.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_forwardPlease help me do question 1aarrow_forwardFor companies that use a perpetual inventory system, all of the following are reasons for taking a physical inventory except to determine losses due to employee theft. to determine ownership of the goods. to check the accuracy of the records. to determine the amount of wasted raw materials.arrow_forward
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