Q2. In your audit of Aviary Corporation for calendar year 2016, you found a number of matters that you believe represent possible adjustments to the companys books. These matters are describe below.

1. Inventory cutoff tests indicate that several sales transactions for goods shipped in 2016 were not recorded. Aviary Corporation uses a perpetual inventory system. The sales were on account, for a total amount of $30,000. The associated inventory cost was $10,000.

2. The company currently has set the allowance for bad debts account at $55,000. Your tests indicate that $85,000 is an appropriate amount for the allowance.

3. Equipment originally costing $800,000 that was fully depreciated with a residual value of $100,000 was sold for $140,000 in December 2016. The purchaser agreed to pay for the equipment by January 2017. No entry has been recorded for this transaction.

4. Miscellaneous expenses of $5,000 was incorrectly classified as accounts payable.

5. The company received new computer equipment valued at $50,000 on January 3, 2017, that had been ordered and shipped F.O.B. shipping point to Westmoreland on December 27, 2016. No entry has been recorded for this purchase, which was financed by a long-term note payable due in full June 30, 2018.

Requirements: 1 of 2: Propose auditors adjusting entries for the matters above.

2 of 2: Complete the Unadjusted Misstatement Audit Schedule below. Use positive numbers to indicate overstatements, and negative numbers to indicate understatements. Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities Income Before Tax 1. 2. 3. 4. 5. Totals