Question

Farley bains, an auditor with nolls cpas, is performing a review of cullumber company's inventory account. cullumber did not have a good year, and top management is under pressure to boost reported income. according to its records, the inventory balance at year-end was $691,160. however, the following information was not considered when determining that amount. (al) prepare a schedule to determine the correct inventory amount. (show amounts that reduce inventory with a negative sign e.g. -45 or parentheses e.g. (45).) 1. 2. 3. 4. 49°f mostly cloudy ending inventory-as reported included in the company's count were goods with a cost of $230,240 that the company is holding on consignment. the goods belong to nader corporation. the physical count did not include goods purchased by cullumber with a cost of $39,790 that were shipped fob shipping point on december 28 and did not arrive at cullumber's warehouse until january 3. included in the inventory account was $17,680 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year.

Answer 1

To determine the correct inventory amount, the auditor needs to consider adjustments. Goods on consignment should be excluded, and goods in transit should be included. Office supplies for internal use should also be deducted.

Step-by-step explanation:

To determine the correct inventory amount, Farley Bains, the auditor, needs to consider several adjustments to the reported inventory balance. First, goods held on consignment should be excluded from the inventory. In this case, cullumber company is holding goods with a cost of $230,240 on consignment for Nader Corporation. These goods should be deducted from the reported inventory balance. Second, goods purchased by cullumber with a cost of $39,790 that were shipped FOB shipping point on December 28 but arrived at the warehouse on January 3 should be included in the inventory, as they were owned by cullumber at year-end. Finally, office supplies with a value of $17,680 that were stored in the warehouse for internal use should also be deducted from the inventory balance.