STRAIGHT PROBLEMS Proble14 Preparation of audit Yorking Paper for adjusting Entries - Perpetual Susta You have been engaged for th audit of the Towering Heights Company for the year ended December 31, 2020. The Towering Heights Company is engaged in the wholesale chemical business and makes all sales at 25% over cost. SALES Date Reference Amount Date Reference Amount 2020 2020 Dec-31 Closing entry 699,860 Dec. 1 BFWD 658,320 Dec-27 SI No. 965 5,195 Dec-28 SI No. 966 19,270 Dec-28 SI No. 967 1302 Dec-31 SI No. 969 5,841 Dec.31 SI No. 970 7.922 Dec-31 SI No. 971 2010 699,860 699.860 (SI - Sales Invoice) 3.100 PURCHASES Date Reference Amount Date Reference Amount 2020 2020 Dec-01 BFWD 360,300 Dec-31 Closing entr 385,346 Dec-28 RR No. 1059 Dec-31 RR No. 1061 8,965 Dec-31 RR No. 1062 4,861 RR No. 1063 8,120 38. 346 385 346 (RR-Receiving Report) You have observed the physical inventory of goods in the warehouse on December 31, 2020 and were satisfied that it was properly taken. When performing a sales and purchases cut-off test, you found that at December 31, 2020, the last receiving report which had been used was No. 1063 and that no shipment had been made on any sales invocies with number larger that No. 968. You also obtained the following additional information: 1. Included in the warehouse physical inventory at December 31, 2020 were chemicals which had been purchased and received on receiving report No 1060 but for which an invoice was received until 2021. Cost was P 2,183. 2. In the warehosue at December 31, 2020 were goods which had been sold and paid for by the customer but which were not shipped out until 2021. They were also sold on sales invoice No. 965 and were not inventoried. 3. On the evening of December 31, 2020, there were two cars on the Towering Heights Company siding: A Car No. AR8162 wasunloaded on January 2, 2021 and received on receiving report No. 1063. The freight was paid by the vendor. B. Car No. BAE4123 was loaded and sealed on December 31, 2020, and was switched of the company's siding on January 2, 2021. This order was sold for P 12,700 on sales invoice No. 968. 4. Temporarily stranded at december 31, 2020 on a railroad siding, were two cars of chemicals enroute to the Z Pulp and Paper Company. They were sold on sales invoice No. 966 and the terms were FOB destination. 5. Enroute the Towering Heights Company on December 31, 2020 was a truckload of material which was received on receiving report No. 1064. The material was shipped FOB destination and freight of P 75 was paid by Towering Heights Company. However, the freight was deducted from the purchase price of P 975. 6. Included in the physical inventory were chemicals exposed to rain in transit and deemed unsalable. Their invoice cost was P 1.250 and freight charges of P 350 had been paid on the chemicals. Required: Prepare auditor's working paper adjusting entries resulting from above data. (Assume that the ending inventory has been recorded through the cost of sales method.) SOLUTION: TOVERING HEIGHTS COMPANY Audit Working Paper Adjusting Entries As at December 31, 2020 No. Account Names Debit Credit STRAIGHT PROBLEMS Proble14 Preparation of audit Yorking Paper for adjusting Entries - Perpetual Susta You have been engaged for th audit of the Towering Heights Company for the year ended December 31, 2020. The Towering Heights Company is engaged in the wholesale chemical business and makes all sales at 25% over cost. SALES Date Reference Amount Date Reference Amount 2020 2020 Dec-31 Closing entry 699,860 Dec. 1 BFWD 658,320 Dec-27 SI No. 965 5,195 Dec-28 SI No. 966 19,270 Dec-28 SI No. 967 1302 Dec-31 SI No. 969 5,841 Dec.31 SI No. 970 7.922 Dec-31 SI No. 971 2010 699,860 699.860 (SI - Sales Invoice) 3.100 PURCHASES Date Reference Amount Date Reference Amount 2020 2020 Dec-01 BFWD 360,300 Dec-31 Closing entr 385,346 Dec-28 RR No. 1059 Dec-31 RR No. 1061 8,965 Dec-31 RR No. 1062 4,861 RR No. 1063 8,120 38. 346 385 346 (RR-Receiving Report) You have observed the physical inventory of goods in the warehouse on December 31, 2020 and were satisfied that it was properly taken. When performing a sales and purchases cut-off test, you found that at December 31, 2020, the last receiving report which had been used was No. 1063 and that no shipment had been made on any sales invocies with number larger that No. 968. You also obtained the following additional information: 1. Included in the warehouse physical inventory at December 31, 2020 were chemicals which had been purchased and received on receiving report No 1060 but for which an invoice was received until 2021. Cost was P 2,183. 2. In the warehosue at December 31, 2020 were goods which had been sold and paid for by the customer but which were not shipped out until 2021. They were also sold on sales invoice No. 965 and were not inventoried. 3. On the evening of December 31, 2020, there were two cars on the Towering Heights Company siding: A Car No. AR8162 wasunloaded on January 2, 2021 and received on receiving report No. 1063. The freight was paid by the vendor. B. Car No. BAE4123 was loaded and sealed on December 31, 2020, and was switched of the company's siding on January 2, 2021. This order was sold for P 12,700 on sales invoice No. 968. 4. Temporarily stranded at december 31, 2020 on a railroad siding, were two cars of chemicals enroute to the Z Pulp and Paper Company. They were sold on sales invoice No. 966 and the terms were FOB destination. 5. Enroute the Towering Heights Company on December 31, 2020 was a truckload of material which was received on receiving report No. 1064. The material was shipped FOB destination and freight of P 75 was paid by Towering Heights Company. However, the freight was deducted from the purchase price of P 975. 6. Included in the physical inventory were chemicals exposed to rain in transit and deemed unsalable. Their invoice cost was P 1.250 and freight charges of P 350 had been paid on the chemicals. Required: Prepare auditor's working paper adjusting entries resulting from above data. (Assume that the ending inventory has been recorded through the cost of sales method.) SOLUTION: TOVERING HEIGHTS COMPANY Audit Working Paper Adjusting Entries As at December 31, 2020 No. Account Names Debit Credit