Question
11-72 (Inventory Cutoff Problem, LO 10) The auditor has gathered shipping cutoff information for Johnny M. Golf Company in conjunction with its December 31 year
11-72 (Inventory Cutoff Problem, LO 10) The auditor has gathered shipping cutoff information for Johnny M. Golf Company in conjunction with its December 31 year end. The auditor has observed the clients year-end physical inventory and is satisfied with the clients inventory procedures. The client has adjusted the year-end book value to the physical inventory compilation (book to physical adjustment) so that the account balance at year end equals the physical count. For purposes of analysis, you should assume that all items have a gross margin of 30%. The last shipping document and bill of lading used during the current year is 4500 and is the primary evidence regarding whether the goods were shipped before or after inventory. All shipping documents are sequentially numbered, and the auditor has established that the client uses them in order. The shipping date listed in the journal is the date recorded on the sales invoice. Cost of goods sold is recorded at the same time the invoice is recorded.
?
c. Assume that the client took physical inventory on October 31 and adjusted the books to the physical inventory at that time. Given the information from the December and January sales journals, prepare the necessary year-end adjusting entries. Why are the entries different from those suggested for part (b)?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started