Reference no: EM132028107

Scenario -

The audit senior has asked you to review the current liabilities for Hogg Enterprises as your first assignment on the audit. After reviewing the current liabilities account documents you noticed that the following issues need addressing:

An invoice from Mike Co. for supplies totaling $1,000 was not recorded.

A check totaling $2,500 from Johnson Co. was received for goods, but not recorded.

The latest utilities bill for $1,250 was recorded twice.

Warranties for the last quarter's sales of $1,100,000 were never recorded. Past history shows that claims are typically five percent of sales.

Hogg Enterprises' portion of the payroll taxes for the month of December was not recorded. The employee's portion was recorded. Total payroll for the month of December was $50,000.

A letter from Hogg's attorney revealed that Hogg is being sued by a customer. The attorney has estimated that if Hogg loses the lawsuit, he faces having to pay $500,000. According to the attorney, there is a reasonable possibility that Hogg will lose the lawsuit.

A letter from Hogg's tax accountant showed that they may receive a tax refund from the previous period's income tax filing because of an error made by the Internal Revenue Service (IRS) in recording the tax return that was disputed by Hogg's tax accountant. The refund, if received, would be for $40,000. To date, the dispute has not been settled by the IRS.

For this assignment, you are required to analyze the issues and prepare any necessary journal entries. In addition, you need to create a log of issues that will be addressed in the final report to the audit senior.