Reference no: EM132525616

Question - Rachel Warren, an auditor with Laplante CPAs, is performing a review of Larkspur, Inc.'s inventory account. Larkspur, Inc. 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 $824,000. However, the following information was not considered when determining that amount.

Prepare schedule to determine the correct inventory amount.

1. Included in the company's count were goods with a cost of $303,000 that the company is holding on consignment. The goods belong to Harmon Corporation.

2. The physical count did not include goods purchased by Larkspur, Inc. with a cost of $47,000 that were shipped FOB destination on December 28 and did not arrive at Larkspur, Inc.'s warehouse until January 3.

3. Included in the inventory account was $18,000 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.

4. The company received an order on December 29 that was boxed and sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of $41,500 and a cost of $39,000. The goods were not included in the count because they were sitting on the dock.

5. Excluded from inventory was an FOB shipping point sale to Reza Corporation made on December 29, for goods with a selling price of $84,000 and a cost of $50,000. The goods arrived on January 3. Reza had only ordered goods with a selling price of $20,000 and a cost of $8,300. However, a sales manager at Larkspur, Inc. had authorized.