Auditing and Assurance Services 1st Edition by Iris Stuart

Exercise 36

Inventory calculations. The inventory for BCS, Inc. at the beginning of the year was $158,752,000. During the year, the company purchased $5,731,600,300 of inventory. At the year-end, the value of inventory, after adjustment, was $102,003,250.
a. What was cost of goods sold during the year
b. Calculate the inventory turnover ratio. Is this ratio good if the company sells computers Explain your answer.
c. If the inventory turnover ratio was higher last year, what misstatements in the financial statements could explain the difference in turnover ratios for the two years
d. If the inventory turnover ratio was lower last year, what misstatements in the financial statements could explain the difference in turnover ratios for the two years
e. If cost of goods sold is misstated, is net income correct Is the value of inventory on the balance sheet correct Which misstatement do the auditors worry about the most