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Find errors made in Accounts receivable audit make corrections and include explanations.Find errors made in Inventory audit make corrections and include explanations. Also refer to and include FASB...

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Find errors made in Accounts receivable audit make corrections and include explanations.Find errors made in Inventory audit make corrections and include explanations.
Also refer to and include FASB codification
Answered Same Day Nov 05, 2021

Solution

Preeta answered on Nov 05 2021
138 Votes
ACCOUNTS RECEIVABLE ERRORS:
For the accounts receivable, He
ie Hancock with ID 124, amount of $2,750 was wrongly posted as $2,570. So accounts receivable is to be increased by $180. For the accounts receivable, Jennifer Aniston with ID 133, amount of $7,700 was wrongly posted as $7,007. So accounts receivable is to be increased by $697. For the accounts receivable, Lawrence Taylor with ID 148, amount of $7,250 was wrongly posted as $7,520. So accounts receivable is to be decreased by $270. For the accounts receivable, Jimi Hendrix with ID 169, amount of $698 was wrongly posted as $986. So accounts receivable is to be decreased by $288.
So, total accounts receivable adjustment will be as follows:
Amount shown in the financial statement = $950,000
(+) Addition for e
or = $ 180
(+)Addition for e
or = $ 697
(-) Deduction for e
or = $ (270)
(-) Deduction for e
or = $ (288)
                     $ 950,319
For the year end, 12/31/15, reserve of 2% was to be created. Credit sale for the year $ 950,319, 2% reserve is to be $19,006, where as the amount has been recorded as $14,250. So, there is a difference of $ 4,756, which needs to be added to the allowance for doubtful debts.
If we follow the assumptions of the controller, then 100% reserve is to be created for the dues more than 366 days and 15% reserve is to be created on the dues which are due less than 366 days. From the accounts receivable sheet, details can be obtained regarding the accounts due for more than 366 days: (3,500+2,000+5,600+658+2,500+2,500) = $ 16,758
Other accounts receivable due for less than 366 days: (71,088 – 16,758) = $ 58,745
So, bad debt allowance = [(16,758*100%)+(58,745*15%) = $25,569.75.
It depends on the company as to which bad debt reserve they want to maintain among the two different approaches.
BUS 507: AUDITING INVENTORY
1. FIFO method can be used for the inventory while conducting the audit since that method is followed by the company for the purpose of financial statement. All the purchase bills and selling bills can be checked to measure the inventory. Physical count of the inventory also needs to be ca
ied out for the proper verification of the inventory. Any inventory in transit needs to be accounted for. Already sold goods will not be considered a part of the inventory even though still present in the company stores. Unsellable and damaged inventory will also not be considered a part of the inventory. The goods on consignment will also not be considered part of the inventory since the ownership is still hold by the suppliers and the ownership will shift to Molloy only after the sales.
2. If any changes are made in the inventory then there will be impacts on the inventory. If there are any e
ors in cost of goods sold and sales there those accounts will also be impacted.
3. Calculation of inventory:
Consumer Electronics:
52” Flat Pannel TVs:
    Units Available for Sale
    = 255+200
    = 455
    Units Sold
    
    = 400
    Units in Ending...
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