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Concept explainers
Your client, Ridgewood Heating and Cooling, specializes in residential air conditioning and heating installations. The company maintains an inventory of air conditioning units, furnaces, and air handling ductwork. The client has provided the following selected financial statement information for the year ending December 31, 2016:
Following is a breakdown of the ending inventory account as of December 31, 2016:
Ridgewood stores inventory in a 100,000 square foot warehouse facility at a location different from its corporate office. A single AC unit is stored on a 4 foot by 4 foot pallet. Warehouse storage shelves allow the company to store 1 pallet on the floor while 2 additional pallets are placed on shelves above the first pallet. Furnaces are also stored on similar-sized pallets. Due to the height of the furnaces, only one unit can be stored on a shelf above an other pallet that rests on the floor. Air handling ducts are stored in boxes that are 5 foot by 5 foot at the base and 7 feet tall. Three boxes can be stacked on top of the box that sits on the floor.
Required
- a. Design substantive analytical procedures to evaluate the reasonableness of the ending inventory account.
- b. What concerns, if any, do you have about the ending inventory at Ridgewood Heating and Cooling?
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Chapter 21 Solutions
EP AUDITING+ASSURANCE...-MYACCT.LAB
- N Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2025. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2025, the balance in Garcia's Raw Materials Inventory account was $408,000. Alcide summarized the relevant inventory cost and market data at May 31, 2025, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Garcia's May 31, 2025, financial statements for inventory under the lower-of-cost-or-market rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Consider the following expanded data at May 31, 2025. Assume Garcia uses LIFO inventory costing. F5 Aluminum siding…arrow_forwardSplish Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Splish, has gathered the following data concerning inventory. At May 31, 2020, the balance in Splish's Raw Materials Inventory account was $481,440, and Allowance to Reduce Inventory to Market had a credit balance of $26,190. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Splish's May 31, 2020, financial statements for inventory at lower-of-cost-or-market as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Assume Garcia uses LIFO inventory costing. Aluminum…arrow_forwardCoronado Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31. 2020. Jim Alcide, controller for Coronado, has gathered the following data concerning inventory. At May 31. 2020, the balance in Coronado's Raw Materials Inventory account was $501,840, and Aliowance to Reduce Inventory to Market had a credit balance of $29,360. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Coronado's May 31, 2020, financial statements for inventory at lower-of-cost-or-market as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Assume Garcia uses LIFO inventory costing.…arrow_forward
- Garcia Home Improvement plc installs replacement siding, windows and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended MAY 31, 2019. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2019, the balance in Garcia's Raw Materials Inventory account was $408,000, and Allowance to Reduce Inventory to NRN had a credit balance of $27,500. Alcide summarized the relevant inventory cost and market data at May 31, 2019, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that shoukd share on Garcia's May 31, 2019, financial statements for inventory under the LCNRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Cost Sales Price Net Realizable Value Aluminum siding $…arrow_forwardSandhill Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Sandhill, has gathered the following data concerning inventory. At May 31, 2020, the balance in Sandhill's Raw Materials Inventory account was $510,000, and Allowance to Reduce Inventory to Market had a credit balance of $29,580. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Sandhill's May 31, 2020, financial statements for inventory at lower-of-cost-or-market as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Assume Garcia uses LIFO inventory costing.…arrow_forwardCarla Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Carla, has gathered the following data concerning inventory. At May 31, 2020, the balance in Carla's Raw Materials Inventory account was $505,920, and Allowance to Reduce Inventory to NRV had a credit balance of $27,630. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Carla's May 31, 2020, financial statements for inventory under the LCNRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Aluminum siding Cedar shake siding Louvered glass doors Thermal…arrow_forward
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- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
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