The following sales were selected for a cutoff test of Arnaz Company, an audit client, for...

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The following sales were selected for a cutoff test of Arnaz Company, an audit client, for the December 31, 20X3 financial statements. All sales are credit sales and are shipped FOB shipping point. They are recorded on the billing date indicated. The company adds a 25% markup on cost to arrive at the selling price of its merchandise. ARNAZ COMPANY SALES INVOICES SELECTED FOR CUTOFF TEST OF SALES FOR AUDIT YEAR ENDING DECEMBER 31, 20X3 Date Invoice Number Invoice Amount Shipped Billed 4520 $ 45,000 12/28/X3 12/29/X3 4521 52,000 12/29/X3 1/02/X4 4522 100,000 1/03/X4 12/31/X3 4523 65,000 1/02/X4 1/03/X4 REQUIRED: (1) (2) (3) What adjusting journal entries, if any, would you make for each of these items? Consider both the revenue and cost implications of this cutoff. Assume the company uses a perpetual inventory system. What complications are created by shipping terms of FOB destination when trying to determine when to record revenue? Under what circumstances might an auditor accept sales that are recorded when shipped, even though they are shipped FOB destination? The following sales were selected for a cutoff test of Arnaz Company, an audit client, for the December 31, 20X3 financial statements. All sales are credit sales and are shipped FOB shipping point. They are recorded on the billing date indicated. The company adds a 25% markup on cost to arrive at the selling price of its merchandise. ARNAZ COMPANY SALES INVOICES SELECTED FOR CUTOFF TEST OF SALES FOR AUDIT YEAR ENDING DECEMBER 31, 20X3 Date Invoice Number Invoice Amount Shipped Billed 4520 $ 45,000 12/28/X3 12/29/X3 4521 52,000 12/29/X3 1/02/X4 4522 100,000 1/03/X4 12/31/X3 4523 65,000 1/02/X4 1/03/X4 REQUIRED: (1) (2) (3) What adjusting journal entries, if any, would you make for each of these items? Consider both the revenue and cost implications of this cutoff. Assume the company uses a perpetual inventory system. What complications are created by shipping terms of FOB destination when trying to determine when to record revenue? Under what circumstances might an auditor accept sales that are recorded when shipped, even though they are shipped FOB destination?