As part of your audit of financial statements of Oscar Inc. as of and for the period ended December 31,

2020, you are rendering purchases cut-off to audit the clients' purchases/accounts payable and the

corresponding inventory balances.

The physical inventory was actually taken on December 29, 2020 rather than the evening of December

31, so that the company employees might enjoy the New Year's festivities. You have observed the taking

of the physical inventory. As taken, the physical inventory included only merchandise received through

\December 29. The subsequent compilation of the inventory includes only the merchandise physically

counted and is not yet recorded on the books. After having completed appropriate work on the inventory

as compiled, you make additional tests to determine:

a. The correct cut off the purchases account for the year 2020. (it is the company policy to

recognize purchases based on freight terms and the passage of title). The purchases ledger

balance is P650,000 while the accounts payable ledger balance is P32,000.

b. The correct amount of the inventory to be stated on a comparable basis with acquisition

costs (purchases) and sales. The inventory summary shows a total of P27,000.

Listed in the table below are certain matters developed in the course of your tests.

Certain voucher register entries are as follows:

RR No.

F.O.B. Terms

Supplier

Shipment

date

Goods

Receipt

date

Invoice

No. Amount

December, 2020

22101 Destination 12-23-19 12-26-19 1401 P 250

22102 Shipping point 12-24-19 12-30-19 9176 310

22103 On consignment 12-24-19 12-31-19 0010 180

22104 Sale with buy-back

agreement

12-24-19 12-29-19 1307 550

22105 Shipping point 12-26-19 1-2-20 6609 690

22106 Destination 12-26-19 12-31-19 6610 420

22107 Destination 12-26-19 1-3-20 0481 750

22108 Shipping point 12-27-19 12-30-19 3671 290

22110 Shipping point 1-2-20 1-4-20 6098 350

January, 2021

22111 Destination 12-26-19 1-2-20 7611 680

22112 Shipping point 12-27-19 12-30-19 7711 460

22113 Destination 12-27-19 12-29-19 9001 770

22114 Destination 12-28-19 1-2-20 8345 205

22115 On consignment 12-28-19 1-3-20 4678 315

22116 Destination 12-29-19 12-31-19 9981 595

22117 Bill and hold

agreement (see

audit note b)

1-2-20 1-5-20 7263 610

22118 Destination 12-31-19 1-4-29 4915 375

22119 Shipping point 1-2-20 1-5-20 5666 805

Audit note:

a. RR No. 22109 were for goods received on 12-29-19 but the purchase invoice documents were yet

to be received from the supplier. The invoice amount is P920 and were shipped under FOB

Destination term.

b. The bill and hold agreement covering goods received under RR 22117 was executed on December

29, 2020.

Requirements: Adjusted balances as of December 31, 2020, of:

1. Accounts payable

2. Inventory