Inventory Valuation You are engaged in an audit of the Roche Mfg. Company for the year ended December 31, 2016. To reduce the workload at year-end, the company took its annual physical inventory under your observation on November 30, 2016. The company's inventory account, which includes raw materials and work in process, is n 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 $60,680 was understated by $3,700. To avoid distorting the interim financial statements, the company decided not to adjust the book inventory until year-end except for obsolete inventory items. Your audit revealed this information about the November Bo inventory: Pricing tests showed that the physical inventory was overpriced by $2,460. Footing and extension errors resulted in a $150 understatement of the physical inventory. Direct labor included in the physical inventory amounted to $8,790. 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 $280. 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, 2016 inventory. Total debits to certain accounts during December are: December . . . . Purchases $24,190 Direct labor 11,830 Manufacturing overhead expense 26,550 Cost of sales 66,910 The cost of sales of $66,910 Included direct labor of $13,920. Normal scrap loss on established product lines is negligible. However, a special order started and completed during December had excessive scrap loss of $890, which was charged to Manufacturing Overhead Expense. Required: Required: 1. Compute the correct amount of the physical inventory at November 30, 2016. Inventory per books $ Physical inventory, per client Total Corrected physical inventory at November 30, 2016 2. Without prejudice to your solution to Requirement 1, assume that the correct amount of the inventory November 30, 2016 was $55,000. Compute the amost of the inventory at December 31, 2016. Corrected physical inventory at November 30 Inventory of materials at November 30 Total material available DO $ Corrected physical inventory at November 30, 2016 2. Without prejudice to your solution to Requirement 1, assume that the correct amount of the inventoi November 30, 2016 was $55,000. Compute the amount of the inventory at December 31, 2016. Corrected physical inventory at November 30 $ Inventory of materials at November 30 $ Total material available Total Total Materials inventory at December 31 DO Inventory at December 31, 2016 Check My Work Previous Next