Question
Inventory Valuation You are engaged in an audit of Roche Mfg. Company for the year ended December 31, 2019. To reduce the workload at year-end,
Inventory Valuation
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You are engaged in an audit of Roche Mfg. Company for the year ended December 31, 2019. To reduce the workload at year-end, Roche took its annual physical inventory under your observation on November 30, 2019. Roche's inventory account, which includes raw materials and work in process, is on a perpetual basis, and it uses the first-in, first-out method of pricing. It has no finished goods inventory. The company's physical inventory revealed that the book inventory of $61,830 was understated by $2,720. To avoid distorting the interim financial statements, Roche decided not to adjust the book inventory until year-end except for obsolete inventory items. Your audit revealed this information about the November 30 inventory:
- Pricing tests showed that the physical inventory was overpriced by $1,310.
- Footing and extension errors resulted in a $130 understatement of the physical inventory.
- Direct labor included in the physical inventory amounted to $9,040. Overhead was included at the rate of 200% of direct labor. You determined that the amount of direct labor was correct and the overhead rate was proper.
- The physical inventory included obsolete materials recorded at $300. During December, these materials were removed from the inventory account by a charge to cost of sales.
Your audit also disclosed the following information about the December 31, 2019, inventory.
- Total debits to certain accounts during December are:
December Purchases $25,260 Direct labor 11,120 Manufacturing overhead expense 25,860 Cost of sales 74,710 - The cost of sales of $74,710 included direct labor of $12,680.
- Normal scrap loss on established product lines is negligible. However, a special order started and completed during December had excessive scrap loss of $780 which was charged to Manufacturing Overhead Expense.
Required:
1. Compute the correct amount of the physical inventory at November 30, 2019.
Inventory per books $fill in the blank 10240dfd3f84061_1 fill in the blank 10240dfd3f84061_3 Physical inventory, per client $fill in the blank 10240dfd3f84061_4 fill in the blank 10240dfd3f84061_6 Total $fill in the blank 10240dfd3f84061_7 $fill in the blank 10240dfd3f84061_9 fill in the blank 10240dfd3f84061_11 fill in the blank 10240dfd3f84061_12 Corrected physical inventory at November 30, 2019 $fill in the blank 10240dfd3f84061_13 2. Without prejudice to your solution to Requirement 1, assume that the correct amount of the inventory at November 30, 2019, was $55,670. Compute the amount of the inventory at December 31, 2019.
Corrected physical inventory at November 30 $fill in the blank f603fefd207ef9f_1 $fill in the blank f603fefd207ef9f_3 fill in the blank f603fefd207ef9f_5 fill in the blank f603fefd207ef9f_6 Inventory of materials at November 30 $fill in the blank f603fefd207ef9f_7 fill in the blank f603fefd207ef9f_9 Total material available $fill in the blank f603fefd207ef9f_10 $fill in the blank f603fefd207ef9f_12 $fill in the blank f603fefd207ef9f_14 fill in the blank f603fefd207ef9f_16 fill in the blank f603fefd207ef9f_17 Total $fill in the blank f603fefd207ef9f_18 fill in the blank f603fefd207ef9f_20 Total $fill in the blank f603fefd207ef9f_21 fill in the blank f603fefd207ef9f_23 fill in the blank f603fefd207ef9f_24 Materials inventory at December 31 $fill in the blank f603fefd207ef9f_25 $fill in the blank f603fefd207ef9f_27 fill in the blank f603fefd207ef9f_29 fill in the blank f603fefd207ef9f_30 Inventory at December 31, 2019 $fill in the blank f603fefd207ef9f_31
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