Reference no: EM132974368
You were assigned to audit the inventories of Titanuim Corp. in relation to your audit firm's audit of the company's financial statements as of and for the period ended December 31, 2020. Since internal control over inventories were good, you audit manager simply asked you to render analytical procedure to test the reasonableness of the inventory balance.
The following information were made available by Titanuim Corp.'s accountant:
Cost Retail
Beginning inventory 1,020,000 1,920,000
Purchases 13,072,500 22,155,000
Freight in 300,000
Purchase return 450,000 750,000
Purchase allowance 270,000
Departmental transfer debit 300,000 425,000
Departmental transfer credit 600,000 1,200,000
Net markup 450,000
Net markdown 1,425,000
Sales 19,800,000
Sales returns and allowance 450,000
Sales discounts 500,000
Employee discount 300,000
Normal Spoilage and breakages 600,000
Abnormal Spoilages and breakages 120,000 200,000
Problem a: The company reported inventories at P400,000 as a result of its physical count on December 31, 2020, what is the amount of estimated ending inventory shortage/overage as a result of your audit procedures? (round off cost% to nearest whole number, eg: xx%)
Required:
1. Lower of cost or average/Conservative/Conventional Approach:
2. Average Approach:
3. FIFO Retail Approach
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