College of Business Administration

ACTG 109A – APPLIED AUDITING

Audit of Inventories

NAME:_____________________________________________COURSE & YEAR: __________________

Problem 1
1. The following data were found during your audit of Astig Company, who operates on a calendar year basis:
a. Goods in transit shipped FOB destination by a supplier, in the amount of P150,000, had been
excluded from the inventory, and further testing revealed that the purchase had been recorded.
b. Goods costing P75,000 had been received, included in inventory, and recorded as a purchase.
However, upon your inspection, the goods were found to be defective and would be immediately
returned.
c. Materials costing P375,000 and billed on December 30 at a selling price of P480,000 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. Terms: fob destination.
d. Goods costing P105,000 was out on consignment with Hagupit Company. Since the monthly
statement from Hagupit Company listed those materials as on hand, the items had been exclulded
from the final inventory and invoiced on December 31 at P120,000.
e. The sale of P225,000 worth of materials and costing P180,000 had been shipped fob point of
shipment on December 31. However, this inventory were part of the final inventory. The sale was
properly recorded 2017.
f. Goods costing P150,000 and selling for P210,000 had been segregated, but not shipped at
December 31, and were not included in the inventory. A review of the customer’s purchase order
set forth terms as fob destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms fob shipping point but the goods had not arrived
as yet. However, these materials costing P255,000 had been included in the inventory count, but
no entry had been made for their purchase.
h. Merchandise costing P300,000 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.
Further inspection of the client’s records revealed the following:
 December 31, 2017 balances:
o Inventory: P1,650,000
o Accounts receivable: P870,000
o Accounts payable: P1,035,000
o Net Sales: P7,575,000
o Net purchases: P3,450,000
o Net income: P765,000

Based on the information above and results of your audit, determine the adjusted balance of following as of
December 31, 2017:
1. Inventory
a. 1,845,000 c. 2,325,000
b. 2,475,000 d. 2,220,000

2. Accounts payable
a. 1,065,000 c. 1,215,000
b. 810,000 d. 1,140,000

3. Net sales
a. 6,825,000 c. 7,095,000
b. 6,975,000 d. 7,455,000

4. Net purchases
a. 3,555,000 c. 3,225,000
b. 3,630,000 d. 3,480,000

5. Net income
a. 330,000 c. 810,000
b. 435,000 d. 825,000

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