In Module IV, you applied MUS sampling procedures in evaluating the correctness

of a subset of debits to the Factory Equipment account. You will recall that

the debits to account 1530 totaled $89,860,000 for 2009. You will also recall that

Derick decided to stratify the population of debits such that $77,260,000 of major

additions, representing replacements of worn-out equipment, was to be audited in

detail. In Module XI, you will analyze this subset of additions, as well as disposals.

You will also complete the Plant Assets lead schedule.

Requirements

1. Using the spreadsheet program and downloaded data, retrieve the file

labeled Plant. Locate the following documentation in this file:

WP 11Plant assets and accumulated depreciationlead schedule

(note that AJE 1 from Module IV has already been posted); and

WP 11.4Factory equipmentadditions and disposals.

Scroll to WP 11.4,Factory EquipmentAdditions and Disposals. What

is the nature of the underlying documentation referred to in the

explanation of audit legends E and W?

2. In recording the 2009 disposals, Janel James, Biltrites plant assets accountant,

miscalculated the accumulated depreciation on the assets sold and

thereby overstated the gain on disposal by $3,090,000. Draft Audit Adjustment

10 at the bottom of WP 11.4 to correct for this misstatement. In

addition, James did not change the standard journal entry for monthly

depreciation to reflect additions and disposals during the year. As a result

depreciation expense for the year is understated by $800,000. Biltrite

depreciates factory equipment on a straight-line basis over a ten-year estimated

useful life with zero salvage value. One-half years depreciation is

taken on all additions and disposals. Draft Audit Adjustment 11 at the bottom

of WP 11.4 to reflect the depreciation understatement. In recording

the under-depreciation, debit account 5300,Cost of Goods SoldPikes

Peak Mountain Bike, inasmuch as all overhead accounts have been closed.

Any further adjustments, therefore, must be reflected in the cost of sales

accounts. Although in Module IV we allocated the adjustment to the five

product cost of sales accounts, the present adjustment is less significant in

amount, and therefore we will reflect the entire amount in account 5300.

(Note: Dont forget to enter Audit Adjustments 1, 10, and 11 in the body of

the document to arrive at correct adjusted balances.)

3. Scroll to WP 11,Plant Assets and Accumulated DepreciationLead

Schedule. Post Audit Adjustments 10 and 11 to the lead schedule.

WP 11 BILTRITE BICYCLES, INC Prepared by Plant Assets and Accumulated Depreciation-Lead Schedule Date December 31, 2009 Reviewed by Date ASSETS 12131/2008 2009 2009 12131/2009 Audi Audited Balance Additions Disposals Balance Adjustments Balance Land $4.000.000 $0 $0 $4.000.000 $4.000.000 $50,000,000 $50,000,000 $50,000,000 Factory Building $0 $0 $200,000,000 $200,000,000 $200,000,000 Warehouses and Sales Offices Factory Equipment $320,000,000 $89.860.000 ($49.860.000) $360,000,000 (1) $360,000,000 $20,000,000 Office Building $0 $0 $20,000,000 $20,000,000 Office Fixtures and Equipmen $9,000,000 $2,000,000 $1,000,000 $10,000,000 $10,000,000 Autos and Trucks $900,000 $100,000 $0 $1,000,000 $1,000,000 .........so $645.000.000 $645,000,000 $603.900.000 $91,960,000 $50.860.000 ACCUMULATED DEPRECIATION 12131/2008 2009 2009 12131/2009 Audi Audited Balance Additions Disposals Balance Adjustments Balance Factory Building $12.140.000 $2,000,000 $14,140,000 $14,140,000 $105,000,000 $105,000,000 Warehouses and Sales Offices $95.000.000 $10,000,000 $144,660,000 Factory Equipment $147.460.000 $42.060.000 ($44.860.000) 10 11 $144,660,000 Office Building $7.200.000 $800,000 $8.000.000 $8.000.000 Office Fixtures and Equipmen $5.075.000 $1.875.000 ($800,000) $6.150.000 $6.150.000 Autos and Trucks $300,000 $320.000 $620.000 $620.000 .........so $278,570,000 $267.175.000 $57.055.000 ($45.660.000) $278,570,000 Workpaper Reference 11.1 11.2 11.3 11.4 11.5 11.6 11.7 Workpaper Reference 11.2 11.3 11.4 11.5 11.6 11.7 WP 11 BILTRITE BICYCLES, INC Prepared by Plant Assets and Accumulated Depreciation-Lead Schedule Date December 31, 2009 Reviewed by Date ASSETS 12131/2008 2009 2009 12131/2009 Audi Audited Balance Additions Disposals Balance Adjustments Balance Land $4.000.000 $0 $0 $4.000.000 $4.000.000 $50,000,000 $50,000,000 $50,000,000 Factory Building $0 $0 $200,000,000 $200,000,000 $200,000,000 Warehouses and Sales Offices Factory Equipment $320,000,000 $89.860.000 ($49.860.000) $360,000,000 (1) $360,000,000 $20,000,000 Office Building $0 $0 $20,000,000 $20,000,000 Office Fixtures and Equipmen $9,000,000 $2,000,000 $1,000,000 $10,000,000 $10,000,000 Autos and Trucks $900,000 $100,000 $0 $1,000,000 $1,000,000 .........so $645.000.000 $645,000,000 $603.900.000 $91,960,000 $50.860.000 ACCUMULATED DEPRECIATION 12131/2008 2009 2009 12131/2009 Audi Audited Balance Additions Disposals Balance Adjustments Balance Factory Building $12.140.000 $2,000,000 $14,140,000 $14,140,000 $105,000,000 $105,000,000 Warehouses and Sales Offices $95.000.000 $10,000,000 $144,660,000 Factory Equipment $147.460.000 $42.060.000 ($44.860.000) 10 11 $144,660,000 Office Building $7.200.000 $800,000 $8.000.000 $8.000.000 Office Fixtures and Equipmen $5.075.000 $1.875.000 ($800,000) $6.150.000 $6.150.000 Autos and Trucks $300,000 $320.000 $620.000 $620.000 .........so $278,570,000 $267.175.000 $57.055.000 ($45.660.000) $278,570,000 Workpaper Reference 11.1 11.2 11.3 11.4 11.5 11.6 11.7 Workpaper Reference 11.2 11.3 11.4 11.5 11.6 11.7