1. UNRECORDED LIABILITIES:

You are auditing the financial statements of a New York City company that buys a product from a manufacturer in Los Angeles. The buyer closes its books on June 30. Assume the following details:

Terms of trade FOB shipping point June 10, buyer sends purchase order to seller June 15, seller ships goods July 5, buyer receives goods July 10, buyer receives sellers invoice

Required:

1. Could this transaction have resulted in an unrecorded liability in the buyers financial statements?
2. If yes, what documents provide audit trail evidence of the liability?
3. On what date did the buyer realize the liability?
4. On what date did the buyer recognize the
5. liability? - New assumption: Terms of trade FOB destination.
6. Could this transaction have resulted in an unrecorded liability in the buyers financial statements?
7. If yes, what documents provide audit trail evidence of the liability?
8. On what date did the buyer realize the liability?
9. On what date did the buyer recognize the liability?