While performing a sales cutoff test for your audit client
While performing a sales cutoff test for your audit client, you review all shipping documents for five days before and five days after year-end. All sales are on credit and are sent FOB shipping point. Cost of goods sold is 75% of sales revenue. You are using the shipping log for the ten-day time period of the test. Test results follow.


a. Identify by shipping number the sales that the company has recorded as sales revenue at December 31, 2010.
b. Identify by shipping number the sales that should have been recorded as sales revenue at December 31, 2010.
c. Prepare the adjusting entry needed to correct the sales revenue and inventory at December 31, 2010.
d. Prepare the journal entries needed to record the sale represented by shipping document 450784, including the cash collection and the revenue recognition.
e. What accounting rule should the company use to recognize revenue?
f. How is the company currently recognizing revenue?
g. What questions should you ask the client to clarify the evidence you have gathered during this audittest?
Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help