You were assigned to audit the inventory and related accounts of Mew Inc. for the year ended December 31, 2023. The accountant provided the following information from its accounting records: Inventory, based on physical count Accounts receivable Accounts payable Net sales Net purchases Net income P950,000 480,000 550,000 4,350,000 2,200,000 1,500,000 The following additional information were revealed during your audit: [1.] Mew Inc. uses periodic inventory system. Physical inventory counting was attended on December 30, 2023. [2.] Goods costing P42,000 was received on December 30, 2023 after the count was conducted. The invoice was received on December 30 and was recorded as a purchase. Upon the inspection of the receiving department on January 2, 2024, it was revealed that the goods were defective and will be returned to the vendor. [3.] Inventory costing P65,000 was billed to a customer on December 29 for P97,500 terms FOB Shipping point. It was segregated in the warehouse and was not included in the count. This is scheduled to be picked up by the common carrier on January 2, 2024. [4.] Goods costing P97,000 and billed on December 30 at a selling price of P145,500, had been segregated in the warehouse for shipment to a customer. The materials had been excluded from inventory as a signed purchase order had been received from the customer and was scheduled to be picked up by the delivery company on December 31. Terms, FOB destination. [5.] The sale of P165,000 worth of materials and costing P110,000 had been shipped FOB point of shipment on December 31. However, this inventory was found to be included in the final inventory. The sale was properly recorded in 2023 [6.] Goods costing P66,000 in transit had been recorded as a purchase but not included as inventory. Terms of sale are FOB shipping point according to the supplier's invoice which had arrived at December 31.
You were assigned to audit the inventory and related accounts of Mew Inc. for the year ended December 31, 2023. The accountant provided the following information from its accounting records: Inventory, based on physical count Accounts receivable Accounts payable Net sales Net purchases Net income P950,000 480,000 550,000 4,350,000 2,200,000 1,500,000 The following additional information were revealed during your audit: [1.] Mew Inc. uses periodic inventory system. Physical inventory counting was attended on December 30, 2023. [2.] Goods costing P42,000 was received on December 30, 2023 after the count was conducted. The invoice was received on December 30 and was recorded as a purchase. Upon the inspection of the receiving department on January 2, 2024, it was revealed that the goods were defective and will be returned to the vendor. [3.] Inventory costing P65,000 was billed to a customer on December 29 for P97,500 terms FOB Shipping point. It was segregated in the warehouse and was not included in the count. This is scheduled to be picked up by the common carrier on January 2, 2024. [4.] Goods costing P97,000 and billed on December 30 at a selling price of P145,500, had been segregated in the warehouse for shipment to a customer. The materials had been excluded from inventory as a signed purchase order had been received from the customer and was scheduled to be picked up by the delivery company on December 31. Terms, FOB destination. [5.] The sale of P165,000 worth of materials and costing P110,000 had been shipped FOB point of shipment on December 31. However, this inventory was found to be included in the final inventory. The sale was properly recorded in 2023 [6.] Goods costing P66,000 in transit had been recorded as a purchase but not included as inventory. Terms of sale are FOB shipping point according to the supplier's invoice which had arrived at December 31.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter6: Cost Of Goods Sold And Inventory
Section: Chapter Questions
Problem 69BPSB
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Question
a. How much is the correct net income for the year ended December 31, 2023?
b. How much is the correct net purchases for the year ended December 31, 2023?
![CASE 2: Audit of Inventories and related account
You were assigned to audit the inventory and related accounts of Mew Inc. for the year ended December 31,
2023. The accountant provided the following information from its accounting records:
Inventory, based on physical count
Accounts receivable
Accounts payable
Net sales
Net purchases
Net income
P950,000
480,000
550,000
4,350,000
2,200,000
1,500,000
The following additional information were revealed during your audit:
[1.] Mew Inc. uses periodic inventory system. Physical inventory counting was attended on December 30, 2023.
[2.] Goods costing P42,000 was received on December 30, 2023 after the count was conducted. The invoice
was received on December 30 and was recorded as a purchase. Upon the inspection of the receiving
department on January 2, 2024, it was revealed that the goods were defective and will be returned to the
vendor.
[3.] Inventory costing P65,000 was billed to a customer on December 29 for P97,500 terms FOB Shipping point.
It was segregated in the warehouse and was not included in the count. This is scheduled to be picked up by
the common carrier on January 2, 2024.
[4.] Goods costing P97,000 and billed on December 30 at a selling price of P145,500, had been segregated in
the warehouse for shipment to a customer. The materials had been excluded from inventory as a signed
purchase order had been received from the customer and was scheduled to be picked up by the delivery
company on December 31. Terms, FOB destination.
[5.] The sale of P165,000 worth of materials and costing P110,000 had been shipped FOB point of shipment on
December 31. However, this inventory was found to be included in the final inventory. The sale was properly
recorded in 2023
[6.] Goods costing P66,000 in transit had been recorded as a purchase but not included as inventory. Terms of
sale are FOB shipping point according to the supplier's invoice which had arrived at December 31.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F38825fa7-25d1-4d00-abae-09f1b37e3439%2Ff9d589a4-5355-4581-b115-fb70c2f67f02%2F1g9462j_processed.jpeg&w=3840&q=75)
Transcribed Image Text:CASE 2: Audit of Inventories and related account
You were assigned to audit the inventory and related accounts of Mew Inc. for the year ended December 31,
2023. The accountant provided the following information from its accounting records:
Inventory, based on physical count
Accounts receivable
Accounts payable
Net sales
Net purchases
Net income
P950,000
480,000
550,000
4,350,000
2,200,000
1,500,000
The following additional information were revealed during your audit:
[1.] Mew Inc. uses periodic inventory system. Physical inventory counting was attended on December 30, 2023.
[2.] Goods costing P42,000 was received on December 30, 2023 after the count was conducted. The invoice
was received on December 30 and was recorded as a purchase. Upon the inspection of the receiving
department on January 2, 2024, it was revealed that the goods were defective and will be returned to the
vendor.
[3.] Inventory costing P65,000 was billed to a customer on December 29 for P97,500 terms FOB Shipping point.
It was segregated in the warehouse and was not included in the count. This is scheduled to be picked up by
the common carrier on January 2, 2024.
[4.] Goods costing P97,000 and billed on December 30 at a selling price of P145,500, had been segregated in
the warehouse for shipment to a customer. The materials had been excluded from inventory as a signed
purchase order had been received from the customer and was scheduled to be picked up by the delivery
company on December 31. Terms, FOB destination.
[5.] The sale of P165,000 worth of materials and costing P110,000 had been shipped FOB point of shipment on
December 31. However, this inventory was found to be included in the final inventory. The sale was properly
recorded in 2023
[6.] Goods costing P66,000 in transit had been recorded as a purchase but not included as inventory. Terms of
sale are FOB shipping point according to the supplier's invoice which had arrived at December 31.
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