Requirements 1. Using the downloaded Excel data, retrieve the file labeled "20X9 Cutoff." (Link) Study WP 6.4, "Inventory Cutoff," and compare it with the voucher register and sales summary portions reproduced in Exhibits BB.13 and BB.14. Comment on any cutoff misstatements that you detect and determine their effect on net income. Do the misstatements appear to be intentional or unintentional? Explain. 2. Draft any audit adjustments suggested by the analysis performed in requirement (1). (Remember that Brony's Bikes maintains perpetual inventory records and adjusts its perpetual inventory to the physical inventory through the appropriate "Cost of Goods Sold" accounts.) Exhibit BR. 12 UNRECORDED INVOICES 7210 7241 7234 Brony's Bikes, Selected Client Adjusting Entries, December 31, 20X9 Real Estate Taxes Utilities Expense Health Insurance Premiums-Factory Health Insurance Premiums-Administrative 9435 1320 1390 7220 9450 9451 Legal Fees 2020 Accounts Payable-Trade Client's entry to adjust for unrecorded invoices at 12/31/06 5100 5200 5300 5400 5500 1310 INVENTORY ADJUSTMENT Derailleurs Inventory Repair Parts Inventory Manufacturing Supplies Accounting Fees Cost of Goods Sold-Grand Prix Touring Bike Cost of Goods Sold-Phoenix Touring Bike Cost of Goods Sold-Pike's Peak Mountain Bike Cost of Goods Sold-Himalaya Mountain Bike Cost of Goods Sold-Waistliner Stationary Bike Raw Materials Inventory Purchased Parts Inventory Finished Goods-Himalaya Mountain Bike Indirect Materials $468,000 1,322,400 Repair Parts Inventory Derailleurs Inventory Finished Goods-Grand Prix Touring Bike Finished Goods-Phoenix Touring Bike Finished Goods-Pike's Peak Mountain Bike 240,980 47,560 788,300 177,650 977,500 150,000 212,000 $456,000 244,300 455,690 88,700 22,300 33,560 333,670 66,340 33,500 61,140 $4,384,390 1330 1376 1385 1390 1320 1371 1372 1373 1379 Finished Goods-Waistliner Stationary Bike Client's entry to adjust perpetual inventory records to physical inventory taken as of 12/31/06. (Adjustments to materials and parts inventories were allocated proportionately to the five cost-of-goods-sold accounts.) $222,600 625,700 366,800 557,800 22,300 B Brony's Bikes, Voucher Register, December 31, 20X9 LaPrix Derailleurs, Ltd. Kryolock Steel Supply Crown Manufacturing Crystal Manufacturing, Inc. Kryolock Steel Supply Crown Manufacturing Palmer & Nile Advertising MedCare HMO, Inc. Denise Vaughan & Co., CPAS Joelson & Wicks, Attorneys at Law Zebra Cleaning Supplies Crew Brothers Manufacturing IaPrix Derailleurs Itd Accounts Payable Credit $ 415,000 212,480 122,169 589,600 266,800 318,600 112,800 41,600 122,500 233,000 7,865 1,445,900 Raw Materials Debit $ 212,480 266,800 962,200 $ 25,774,213 $3,822,900 Derailleurs Debit $415,000 589,600 962,200 $ 4,376,000 Purchased Parts Debit $ 78,000 215,000 1,445,900 $ 12,430,975 Indirect Materials Debit $ 44,169 Repair Parts Debit 93,000 $ 10,600 $ 883,411 $ 776,500 Account Number 8340 9435 9450 9451 9460 Other Debit $ 112,800 41,600 122,500 233,000 7,865 $ 3,484,427 Date Exhibit BB. 14 Dec. 1 Dec. 1 Dec. 30 Dec. 30 Dec. 30 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Invoice No. Customer 31662 31663 33002 33003 33004 33005 33006 33007 33008 33009 Brony's Bikes, Sales Summary, December 31, 20X9 Bikes and Parts L Mart Department Stores Texas Bike Emporium Rear and Sawbuck Southwest Spokes, Inc. Great Lakes Fitness Centers Big Mart Discount Centers Leisure Time Truly Bikes L Mart Department Stores Accounts Receivable Debit $ 67,000 325,600 266,800 881,870 443,760 144,600 773,200 338,700 122,900 1,322,800 $21,656.900 Grand Prix $ 21,750 185,200 55,300 322,550 77,200 0 288,700 44,860 15,600 497,310 $2.356.700 Phoenix $ 12,600 0 42,800 23,400 55,900 0 0 62,375 31,600 88,760 $9,234.500 Sales-Credit Pike's Peak $ 27,100 89,600 92,300 466,740 223,060 0 410,650 122,400 35,500 714,580 $ 1.329.800 Himalaya $ 5,550 21,500 44,600 32,500 87,600 0 22,300 88,500 40,200 22,150 $7.988.600 Waistliner $0 29,300 31,800 36,680 0 144,600 51,550 20,565 0 0 $747.300 Date Exhibit BB. 16 Dec. 1 Dec. 1 Dec. 1 Dec. 30 Dec. 30 Dec. 30 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Payee Kryolock Steel Supply Crystal Manufacturing MedCare HMO, Inc. Crew Brothers Manufacturing Crown Manufacturing East Texas Power Company Bell Southwest LaPrix Derailleurs, Ltd. Zebra Cleaning Supplies Internal Revenue Service Jones Equipment Jolly Roger Paints Rolla Deal Tires. Inc. Brony's Bikes, Check Register, December 31, 20X9 Voucher Number 12188 12193 12179 12378 12382 12390 12391 12383 12344 12277 12198 12264 12234 Bank Two Check Number 126880 127329 127330 127331 Dollar Bank Check Number 44263 44264 44678 44679 44680 44681 44682 44683 44684 Accounts Payable Debit $ 388,700 654,980 46,400 1,890,000 422,300 455,380 75,688 1,340,000 12,460 3,600,000 896,000 326,000 667,500 $ 24,521,003 Purchases Discounts Credit $ 2,444 3,228 9,450 2,112 6,700 125 4,498 1,630 3,338 $ 87,665 Bank Two Credit $ 46,400 455,380 75,688 $ 1,780,000 Dollar Bank Credit $ 386,256 651,752 1,880,550 420,188 1,333,300 12,335 3,600,000 891,502 324,370 664,162 $ 22,653,338 DATE RECORDED 12/31/20X9 12/31/20X9 1/2/20YO 1/3/20Y0 1/3/20YO 1/4/20Y0 SALES INVOICE NUMBER 33002 33003 33004 33005 33006 33007 33008 33009 33010 33011 VOUCHER NO. 12456 12457 12458 12459 12460 12461 DATE SHIPPED 12/30/20X9 1/2/20YO 1/2/2008 12/31/20Y0 1/2/20YO 1/3/20YO PURCHASES CUTOFF (1) Voucher 12460 was for the purchase of raw materials (2) Voucher 12461 was for the purchase of parts 12/31/20X9 1/3/20Y0 1/4/20Y0 1/4/20YO RECEIVING REPORT NO. DATE SHIPPED 01-12486 01-12487 01-12488 01-12489 02-13001 02-13002 SALES CUTOFF DATE RECORDED 12/30/20X9 12/30/20X9 12/30/20X9 12/31/20X9 12/31/20X9 12/31/20X9 12/31/20X9 12/31/20X9 1/4/20Y0 1/4/20YO All adjustments of perpetual to physical inventories have been made through "Cost of Goods Sold." Examined the following documents for a few days before and after the balance sheet date to determine that transactions were recorded in the proper accounting period: Vouchers Receiving Reports Freight Invoices Sales Invoices Bills of Lading All sales are shipped "FOB shipping point." 12/27/20X9 12/26/20X9 12/28/20X9 12/29/20X9 12/30/20X9 1/2/20YO FREIGHT TERMS FOB ship. point FOB ship. point FOB ship, point FOB ship. point FOB ship. point FOB ship. point FOB ship. point FOB ship. point FOB ship. point FOB ship. point DATE RECEIVED 12/30/20X9 12/31/20X9 12/31/20X9 12/31/20X9 1/2/20YO 1/3/20YO SELLING PRICE $266,800 $881,870 $443,760 $144,600 $773,200 $338,700 $122,900 $1,322,800 $488,900 $788,211 FREIGHT TERMS FOB destination FOB ship. point FOB ship. point FOB ship. point FOB ship. point FOB ship. point COST INVENTORY INCLUDED EXCLUDED Included Included Included Included Excluded Excluded $1,018,556 $376,453 $606,922 INVENTORY INCLUDED EXCLUDED $205,436 excluded $679,040 included. $341,695 included excluded $111,342 $595,364 included. $260,799 included $94,633 excluded included included included COST $1,445,900 $962,200 $488,754 $365,400 $1,879,000 (1) $438,870 (2)