CASE STUDY CALCULATION OF INVENTORIES As a part of the auditing team assigned in relation to Mandurah Ltd, you have been asked to verify the inventories at the Halls Head branch at 30 June 2020. The company uses a perpetual method to account for inventories. In undertaking the task you note that there is a shipping container beside the main warehouse containing goods that Mandurah Ltd wants to sell. You ask the accountant at the Halls Head branch whether he plans to include the goods in the truck in the calculation of the inventories on hand at 30 June 2020. The accountant says that the goods will not be included. You then obtain a copy of the invoice in relation to the container of goods. The container was shipped on 24 June from Sydney, marked FOB Sydney, and the total invoice price was $600 000. The freight bill amounted to $15 000, with terms requiring payment within 30 days. The accountant says he will not pay the invoice until mid‐July, and so the inventories will not be included in determining the inventories on hand at 30 June 2020. Required Write a report to your supervisor advising on the following issues. 1. Does Mandurah Ltd have a liability that should be recorded at 30 June 2020? 2. Should the container of goods be included in the determination of the inventories balance at 30 June 2020? If so, what journal entry would be required? CASE STUDY