I am preparing the working papers for the December 31, 2018 year end audit to present to the companys auditors when they arrive late next week In reviewing the draft financial statements and other information, I have identified a number of issues that need to be addressed Inventory Errors in reviewing the documentation obtained during the December 31, 2018 inventory count for the heavy equipment division, I discovered a number of errors The details are provided below We received an invoice from a supplier on January 3, 2019 for goods purchased with a cost of $61,000 This invoice was entered into our accounts payable system on that date The goods were shipped by the supplier on December 26, 2018 and were received by us on January 3, 2019 The invoice terms were 2 10, n30, FOB shipping These goods were a special order for one of our customers, and we sold the goods to the customer on January 7, 2019 for $93,000 These goods were not included in the December 31 inventory count During the inventory count, the supervisor noticed a box labeled Return for Credit sitting in the receiving bay These goods were not included in the inventory count, as the box was sealed and the supervisor did not know what to do with them On January 4, 2019, the box was opened and the goods were counted Goods with a total cost of $16,000 were returned to inventory, but additional goods with a cost of $2,000 had to disposed, as they were damaged beyond repair Credit memos were issued to customers on January 4, 2019 for $24,000 Included in the inventory count were goods with a cost of $11,000, which were waiting to be picked up by the freight company for delivery to a customer The terms were 1 10 net 30, FOB shipping The goods had been invoiced to the customer on December 31, 2018 at $14,000 An invoice from a supplier for $6,000 was received and entered into the accounts payable system on December 31, 2018 The terms of the invoice were 2 10 n30, FOB destination, and the goods were not received until January 2, 2019 The goods were not included with the inventory count Before I finalize the working papers for the auditor, the Chief Financial Officer has requested I summarize the key financial reporting issues Where possible, he would also like to know the potential impact of the issue on the balance sheet and income statement, and he would like an explanation why an adjustment is required If there are areas where judgment is involved, or the accounting treatment is not clear, he would like to know the alternatives that are available and factors that need to be considered in choosing an alternative

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I am preparing the working papers for the December 31, 2018 year-end audit to present to the companys auditors when they arrive late next week.

I am preparing the working papers for the December 31, 2018 year-end audit to present to the companys auditors when they arrive late next week. In reviewing the draft financial statements and other information, I have identified a number of issues that need to be addressed:

Inventory Errors: in reviewing the documentation obtained during the December 31, 2018 inventory count for the heavy equipment division, I discovered a number of errors. The details are provided below.

We received an invoice from a supplier on January 3, 2019 for goods purchased with a cost of $61,000. This invoice was entered into our accounts payable system on that date. The goods were shipped by the supplier on December 26, 2018 and were received by us on January 3, 2019. The invoice terms were 2/10, n30, FOB shipping. These goods were a special order for one of our customers, and we sold the goods to the customer on January 7, 2019 for $93,000. These goods were not included in the December 31 inventory count.
During the inventory count, the supervisor noticed a box labeled Return for Credit sitting in the receiving bay. These goods were not included in the inventory count, as the box was sealed and the supervisor did not know what to do with them. On January 4, 2019, the box was opened and the goods were counted. Goods with a total cost of $16,000 were returned to inventory, but additional goods with a cost of $2,000 had to disposed, as they were damaged beyond repair. Credit memos were issued to customers on January 4, 2019 for $24,000.
Included in the inventory count were goods with a cost of $11,000, which were waiting to be picked-up by the freight company for delivery to a customer. The terms were 1/10 net 30, FOB shipping. The goods had been invoiced to the customer on December 31, 2018 at $14,000.
An invoice from a supplier for $6,000 was received and entered into the accounts payable system on December 31, 2018. The terms of the invoice were 2/10 n30, FOB destination, and the goods were not received until January 2, 2019. The goods were not included with the inventory count.

Before I finalize the working papers for the auditor, the Chief Financial Officer has requested I summarize the key financial reporting issues. Where possible, he would also like to know the potential impact of the issue on the balance sheet and income statement, and he would like an explanation why an adjustment is required. If there are areas where judgment is involved, or the accounting treatment is not clear, he would like to know the alternatives that are available and factors that need to be considered in choosing an alternative.