To audit a company's sales and purchases cutoffs at the close of the fiscal year ended December 31, 19X1, you have compiled the data listed on the following schedule. All sales and purchases of significant amount from December 26, 19X1, to January 4, 19X2, inclusive, are included. Refer to page 539.

The company realized a gross profit of 30 percent on each sale, and all sales and purchases were recorded as of the invoice dates. Items marked "B" were FOB destination; all other items were FOB shipping point.

The physical inventory taken by the company included only those items actually on hand as of the close of business December 31, 19X1. All items on hand were included except a special machine (see "A" on the cutoff schedule). This special machine was made to order by the company's supplier for one of the company's customers and was in the shipping room ready for shipment. It was excluded from the physical inventory.

The company maintains a perpetual inventory system. The inventory account and the subsidiary records have been adjusted to the physical inventory.

Complete the schedule on page 539 by showing for each item the required adjustment, if any.

(Used with permission of Ernst \& Young)