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5)The workpaper does not state whether the auditor examineddocumentation for the Diana’s Supper Club order returned and receivedon October 31.6)Rather than summarizing the confirmations returned without exception,as was done at the bottom of Working Paper 1, these confirmationsshould have been listed separately.b.1)SalesP11,100Accounts receivableP11,100Inventory 8,600Cost of goods sold8,600To reverse 2016 sale recorded in 2015.2)Allowance for uncollectible accounts1,277Accounts receivable1,277To write off uncollectible account.3)Sales returns and allowances3,634Accounts receivable3,634To record return of spoiled meat and recognize loss in period in which incurred. Meat not restored to inventory, inasmuch as it was spoiled.4)Sales13,000Accounts receivable13,000To correct error in recording customerremittance as a sale.5)Sales Returns334Accounts receivable334Inventory250Cost of goods sold250
Substantive Tests of Receivables and Sales 10-5To record return and restore meat to inventorybecause meat returned in good condition.c.(See completed Exhibits 1.1 and 1.2 reproduced below and on the followingpage.)Exhibit 1.1Monty’s Meat, Inc.Accounts Receivable - TradeAging Analysis October 31, 2015Conf.Past Due (Days)No.CustomerBalanceCurrent1-3031-60Over 60 1060Culley’s MeatsP1,330P1,3301061Jolly Roger Restaurant466P 4661064ABC Grocery 4,2563,0001,256(Other)329,433280,76333,467P12,324P2,8791602Rudy’s Deli3783781603General Foods Grocers13,46813,0004681607Kim’s Fresh Meats2,3341,0741,2601608Dill’s Discount Grocery12,46912,4691612Diana’s Supper Club86633453210/31Balance per ledgerP365,000P311,970P 36,449P13,234P3,347Audit AdjustmentsP(29,345)P(28,068)P(1,277)10/31Audited balanceP335,655P283,902P 36,449P13,234P2,070#Cash receipts 11/1 – 11/27P(210,113)P(13,353)P 0P 0 &11/27OutstandingP73,789P 23,096P13,234P2,070Estimated percent uncollectible10%25%70%100%10/31Estimated uncollectibleP 24,487P7,379P 5,774P 9,264P2,070
10-6 Solutions Manual to Accompany Applied Auditing, 2014 Edition&Traced subsequent collections to November remittance advices.#Obtained balances from subsidiary ledger after agreeing to general ledger control account.Prepared by:Reviewed by:InitialDateInitial DateExhibit 1.2Monty’s Meat, Inc.Accounts Receivable - TradeAllowance for Doubtful Accounts October 31, 201511/1/15BalancepergeneralledgerP28,000#11/1 - 10/31Monthly provision24,000&11/1 - 10/31Write-offs(37,000) @10/31/16BalancepergeneralledgerP15,000AJE 2(1,277)P13,723AJE 6P10,77710/31/16Audited balanceP24,500^AJE 6Bad debts expenseP10,777Allowance for doubtful accountsP10,777To adjust allowance for doubtful accounts toamount considered reasonable in the circumstances.
Substantive Tests of Receivables and Sales 10-7# Traced to last year’s WTB - auditedbalance& Traced to standard journal entries@ Examined documentation and discussed with credit manager andlegal counsel^In light of aging analysis, the above balance, as adjusted, appears tobe adequate.