Your Client's Balance Sheet Date Is 30 June 2012, the Audit

question 55

Essay

Your client's balance sheet date is 30 June 2012, the audit report date is 31 August 2012, and the financial statements are issued 15 September 2012.A customer with a material outstanding accounts receivable balance declared bankruptcy on 5 July 2012 due to a warehouse fire that occurred 27 June 2012.State whether this situation warrants an adjustment to the financial statements, requires disclosure in footnotes but not an adjustment, or needs no action.Justify your answer.

Recognize the components and costs that are assignable to merchandise inventory.

Understand the ethical considerations and financial statement impact of inventory misstatements.

Understand the concept and application of FIFO, LIFO, and weighted average inventory valuation methods.

Prepare general journal entries for transactions involving inventory.

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Definitions:

Merger Premium

The additional amount an acquirer pays over the current market price of a target company's shares during a merger or acquisition.

Market Price

The price at this moment for buying or selling an asset or service.

Cash Acquisition

The purchasing of a company or asset with immediate payment in full in cash, instead of using financing options or issuing shares.