You are auditing the financial statements of a New York City company that buys a product from

Question:

You are auditing the 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 I 5, seller ships goods
July 5, buyer receives goods
July 10, buyer receives seller’s invoice
a. Could this transaction have resulted in an unrecorded liability in the buyer’s If yes, what documents provide audit trail evidence of the liability?
c. On what date did the buyer realize the liability?
d. On what date did the buyer recognize the liability?
New assumption:
Terms of trade free on board destination
e. Could this transaction have resulted in an unrecorded liability in the buyer’s If yes, what documents provide audit trail evidence of the liability?
g. On what date did the buyer realize the liability?
h. On what date did the buyer recognize the liability?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...