Question

In: Accounting

An independent accounting firm has been engaged to audit the 2014 financial statements of a corporation...

An independent accounting firm has been engaged to audit the 2014 financial statements of a corporation which has never undergone an audit. During the audit, it is concluded that the 2014 ending inventory presented by management is in error.

The inventory cannot be counted because much of it has been sold as of the time of the audit.

Therefore, a "test of reasonableness" of the inventory is performed by using the following data from the 2014 income statement prepared by the client.

(a) Sales revenue, $182,000; return sales, $2,000

(b) Purchases, $100,000, purchase returns, $1,000

(c) Freight-in, $2,000

(d) Beginning inventory, $26,000; ending inventory, $60,000

(e) Estimated gross margin rate, 45 percent on sales.

Required: The approximate 2014 ending inventory is, $________ Computations

Solutions

Expert Solution

Ending inventory=purchase+beginning inventory-cost of goods sold.

=101000+26000-99000

=28000

(Step by step solution is given below)

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ekkarill92 answered 1 year ago
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