E8-3 Assume that in an annual audit of Webber Inc. at December 31, 2012, you find the following transactions near the closing date.
1.A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on December 31, 2012. The customer was billed on that date and the machine excluded from inventory although it was shipped on January 4, 2013.
2.Merchandise costing $2,800 was received on January 3, 2013, and the related purchase invoice recorded January 5. The invoice showed the shipment was made on December 29, 2012, f.o.b. destination.
3.A packing case containing a product costing $3,400 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked “Hold for shipping instructions.” Your investigation revealed that the customer’s order was dated December 18, 2012, but that the case was shipped and the customer billed on January 10, 2013. The product was a stock item of your client.
4.Merchandise costing $720 was received on December 28, 2012, and the invoice was not recorded. You located it in the hands of the purchasing agent; it was marked “on consignment.”
5.Merchandise received on January 6, 2013, costing $680 was entered in the purchases journal on January 7, 2013. The invoice showed shipment was made f.o.b. supplier’s warehouse on December 31, 2012. Because it was not on hand at December 31, it was not included in inventory.
Assuming that each of the amounts is material, state whether the merchandise should be included in the client’s inventory, and give your reason for your decision on each item.
P8-4 Hull Company’s record of transactions concerning part X for the month of April was as follows:
E9-1 The inventory of Oheto Company on December 31, 2013, consists of the following items.
Part No. 121 is obsolete and has a realizable value of $0.50 each as scrap.
(a)Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory.
(b)Determine the inventory as of December 31, 2013, by the lower-of-cost-or-market method, applying this method directly to each item.
P9-12 Late in 2009, Joan Seceda and four other investors took the chain of Becker Department Stores private, and the company has just completed its third year of operations under the ownership of the investment group. Andrea Selig, controller of Becker Department Stores, is in the process of preparing the year-end financial statements. Based on the preliminary financial statements, Seceda has expressed concern over inventory shortages, and she has asked Selig to determine whether an abnormal amount of theft and breakage has occurred. The accounting records of Becker Department Stores contain the following amounts on November 30, 2012, the end of the fiscal year.