9.67 Testing Supplies Inventory and Expense Using IDEA

You have been assigned the task of testing the clients Supplies Expense based on pur- chase records and the year-end inventory count. ELMs unaudited Trial Balance shows a recorded amount of $33,650 for Supplies Expense during the 4th quarter. Per the client, Sup- plies Expense consists of the all supplies indirectly used in the factory, but which do not get included in the cost of the manufacturing process. These products are all inventory units beginning with E, Q, or J. Assume that the cost of supplies remained constant throughout the quarter.

1. Using the information given about beginning balances, purchases, ending counts, and the vendor price list, recalculate Supplies Expense. For the purposes of this exercise, ignore any taxes or shipping charges and base costs solely on the price list.

2. Does ELMs recorded Supplies Expense appear reasonable? Would the auditor perform any further detail testing on Supplies Expense? Explain your reasoning.