2.2. The following are sales, cost of sales, and inventory data of client, figures are in $ millions: YEAR 2019 SALE 186.8 COS 117.2 18.4 19.2 OB EB Requirements: 2020 192.8 108.4 19.2 29.6 2018 178.4 110.8 15.6 18.4 a) Assume that $10mil is considered material for audit planning purposes for 2020. Do any of the fluctuations in the gross margin as a percent of sales ratios indicate a possible material misstatement? b) List 3 logical causes of the changes in the gross margin as a percent of sales c) For each of the possible cause, list the further action for auditor to verify the cause

2.2. The following are sales, cost of sales, and inventory data of client, figures are in $ millions: YEAR 2019 SALE 186.8 COS 117.2 18.4 19.2 OB EB Requirements: 2020 192.8 108.4 19.2 29.6 2018 178.4 110.8 15.6 18.4 a) Assume that $10mil is considered material for audit planning purposes for 2020. Do any of the fluctuations in the gross margin as a percent of sales ratios indicate a possible material misstatement? b) List 3 logical causes of the changes in the gross margin as a percent of sales c) For each of the possible cause, list the further action for auditor to verify the cause

Name: 2.2. The following are sales, cost of sales, and inventory data of cl
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Description: 2.2. The following are sales, cost of sales, and inventory data of client, figures are in $ millions:YEAR2018SALE178.4COS110.815.618.4ОВEBRequirements:2020192.8108.419.229.62019186.8117.218.419.2a) Assume that $10mil is considered material for audit

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 26RQSC

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he following information were made available to you by Katz Corp. in line with your audit of its financial statements as of January 1 and for the period ended December 31, 2020: Sales P53,000,000 Purchases 32,000,000 Sales discount 2,000,000 Purchase discount 1,200,000 Sales returns and allowance 1,000,000 Purchase returns and allowance 800,000 Correction of merchandise inventory, beginning error, net of Income tax – credit 400,000 Merchandise Inventory, January 1 (adjusted) 3,400,000 Merchandise Inventory, December 31 3,500,000 Distribution costs 5,000,000 General and administrative expenses 4,000,000 Interest expense 2,000,000 Gain on early extinguishment of long-term debt 500,000 Foreign translation adjustment, net of income tax – credit 1,250,000 Revaluation surplus for the period, net of income tax 700,000 Unrealized loss on financial assets at fair value through other comprehensive income or losses, net of income tax 550,000 Investment income – equity method 3,000,000 Gain on…
Determine the following as a result of your audit: a. What is the cost of ending inventories as of December 31, 2023? b. What is the correct carrying value inventories reported in its December 31, 2023 Statement of Financial Position? c. What is the amount of loss on inventory write down reported in its profit or loss in 2023 assuming that the allowance for inventory write down has a beginning balance of P35,000.
How to compute this problem? Problem:The data shown below were obtained from the financial records of the BST Corporation for the year ended December 31, 2020. Sound Break CorporationIncome and Retained Earnings StatementFor the year Ended December 31, 2020Net Sales P1,000,000Cost of Goods Sold:Inventory, Dec. 31, 2019 P250,000Purchases 720,000Total Goods Available P970,000Inventory 220,000 750,000Gross Margin on Sales P 250,000Selling and Administrative (including Depreciation of P20,000) 125,000Net Income before Tax P 125,000Provision for Income Tax 35,000Net Income for the Year P 90,000Retained Earnings, beginning 130,000Total P 220,000Dividends Paid 30,000Retained Earnings, December 31, 2020 P 190,000 Sound Break CorporationBALANCE SHEETDecember 31, 2019 and 2020 ASSETS 2019 2020Current Assets:Cash P 75,000 P 85,000Marketable Securities 25,000 25,000Trade Receivables, net 185,000 245,000Inventory, at cost 250,000 220,000Prepaid Expenses 15,000 10,000Total Current Assets…
The accountant for Dolfin Company prepared the following income statement. The auditor has asked you to use this statement to provide additional information to Dolfin Company on the Final Questions panel. Dolfin Company Income Statement For the Year Ended December 31, 2020 1 Sales $316,840.00 2 Expenses: 3 Cost of merchandise sold $215,451.20 4 Selling expenses 41,189.20 5 Administrative expenses 34,852.40 6 Interest expense 275.00 7 Total expenses 291,767.80 8 Net income $25,072.20 Final Questions The auditor has asked you to prepare additional information about Dolfin Company’s results for last year. Use the data shown on the income statement in your computations. 1. Compute the operating expenses for Dolfin Company. 2. Compute the gross profit for Dolfin Company. 3. Compute the income from operations for…
LUNA Inc. pre-audit statement of income for the year ended December 31, 2020 is shown below:Sales P 2,964,000Cost of goods sold 1,926,000Gross income 1,038,000Operating expensesRent P250,000Salaries 345,000Utilities 219,000Advertising 30,000Warranty 14,000Other expenses _ 35,500 893,500Net income P 144,500 You obtained the following information from the company’s accounting records: 1. Some of Luna's…
LUNA Inc. pre-audit statement of income for the year ended December 31, 2020 is shown below:Sales P 2,964,000Cost of goods sold 1,926,000Gross income 1,038,000Operating expensesRent P250,000Salaries 345,000Utilities 219,000Advertising 30,000Warranty 14,000Other expenses _ 35,500 893,500Net income P 144,500 You obtained the following information from the company’s accounting records: Some of Luna's…
LUNA Inc. pre-audit statement of income for the year ended December 31, 2020 is shown below:Sales P 2,964,000Cost of goods sold 1,926,000Gross income 1,038,000Operating expensesRent P250,000Salaries 345,000Utilities 219,000Advertising 30,000Warranty 14,000Other expenses _ 35,500 893,500Net income P 144,500 You obtained the following information from the company’s accounting records: Some of Luna's…
LUNA Inc. pre-audit statement of income for the year ended December 31, 2020 is shown below:Sales P 2,964,000Cost of goods sold 1,926,000Gross income 1,038,000Operating expensesRent P250,000Salaries 345,000Utilities 219,000Advertising 30,000Warranty 14,000Other expenses _ 35,500 893,500Net income P 144,500 You obtained the following information from the company’s accounting records: Some of Luna's…
LUNA Inc. pre-audit statement of income for the year ended December 31, 2020 is shown below:Sales P 2,964,000Cost of goods sold 1,926,000Gross income 1,038,000Operating expensesRent P250,000Salaries 345,000Utilities 219,000Advertising 30,000Warranty 14,000Other expenses _ 35,500 893,500Net income P 144,500 You obtained the following information from the company’s accounting records: Some of Luna's…
After the auditors counted the inventory of Cracker Jack Manufacturing Co. and reviewed the accounting records, something appeared to be amiss. Inventory that was counted totaled $295,000. Inventory (1/20) $130,000 Purchases (2020) 760,000 Sales (2020) 1,020,000 Sales returns (2020) 60,000 Gross profit ratio 35% of sales Using the gross profit method, what did the auditors estimate as the amount of inventory that should have been on hand at December 31, 2020?
The condensed statement of income of LUNA, Inc. for the year ended December 31, 2020 is presented below:LUNA, Inc.Statement of Income For the Year Ended December 31, 2020Sales P 1,000,000Cos of sales 600,000Gross income 400,000Operating expenses 150,000Net income P 250,000The December 31, 2020 audit of the company’s financial statements disclosed the following errors:a. December 31, 2020 inventory was understated by P31,000.b. Accrued expenses of P4,000 and prepaid expenses of P6,000 were not recognized in the company’s books.c. Sales of P5,000 were not recorded until January 2021, although the goods were shipped in December 2020 and were excluded from the December 31 physical inventory.d. Purchases of P30,000 made in December 2020, were not recorded although the goods were received and properly included in the December 31, physical inventory.e. A machine was sold for P10,000 on July 1, 2020 and the proceeds were credited to the Sales account. The machine was acquired on January 1,…
During the course of an audit of the financial statements of Julie Company for the yearended December 31, 2019, the following data are discovered: Inventory on January 1, 2019 had been overstated by P300,000. Inventory on December 31, 2019 was understated by P500,000. An insurance policy covering three years had been purchased on January 1, 2018for P150,000. The entire amount was charged as an expense in 2018. During 2019, the entity received a P100,000 cash advance from a customer formerchandise to be manufactured and shipped during 2020. The amount had beencredited to sales revenue. The gross profit on sales is 50%.Net income for 2019 per book was P2,000,000. What is the proper net income for 2019?