You are a junior accountant, recently employed by RM Resources Ltd., a public company traded on the Toronto Stock Exchange. The company is based in Alberta and it operates two divisions: an oil and gas exploration division, and a heavy equipment manufacturing division. The company is aggressively pursuing overseas partners who could provide further financing to expand operations into Asia.

You arrive at work on a Monday morning in early January, 2019 and receive the following email:

To: Junior Accountant

From: Controller

Re: Preparation for annual audit

I am preparing the working papers for the December 31, 2018 year-end audit to present to the companys auditors when they arrive late next week. In reviewing the draft financial statements and other information, I have identified a number of issues that need to be addressed:

1. Inventory Errors: in reviewing the documentation obtained during the December 31, 2018 inventory count for the heavy equipment division, I discovered a number of errors. The details are provided below.

1. We received an invoice from a supplier on January 3, 2019 for goods purchased with a cost of $61,000. This invoice was entered into our accounts payable system on that date. The goods were shipped by the supplier on December 26, 2018 and were received by us on January 3, 2019. The invoice terms were 2/10, n30, FOB shipping. These goods were a special order for one of our customers, and we sold the goods to the customer on January 7, 2019 for $93,000. These goods were not included in the December 31 inventory count. What are the key financial reporting issues? Where possible. What is the potential impact of the issue on the balance sheet and income statement, and explain why an adjustment is required? If there are areas where judgment is involved, or the accounting treatment is not clear. What are the alternatives that are available and factors that need to be considered in choosing an alternative?