You will need to look at the attached document for all the pieces of this problem. If you need anything additional, please let me know. For inventory, I?ve attached an inventory memo that I received from Bradley. I thought he sent you a copy already, but I don?t doubt that he didn?t. I don?t think he knows what an inventory observation memo is ? you?ll have to write the memo based upon Bradley?s observation notes and what you observed when you were there on December 31. In addition to writing an inventory observation memo, you will need to tie in Bradley?s test counts on the client?s count sheets to Apollo?s Inventory Warehouse Report. Finally, tie the Inventory Warehouse Report to Apollo?s Inventory Status Report supplied by Karina last week. Next, judgmentally sample a number of unit costs from recent invoices and tie them to the Inventory Status Report. If the numbers agree, tie the Inventory Status Report into the Inventory Lead Schedule. Lastly, tie the lead schedule into the Trial Balance. Be careful to determine the proper accounts for adjustment when inventory is included or excluded from the physical count. By ?included,? I mean that the inventory cost should already be in the general ledger balance shown in the trial balance. When the inventory is adjusted to match the physical count, the adjustment is to cost of goods sold. The Reserve for Inventory Obsolescence decreased significantly from last year. My conversation with Samuel Carboy indicated that they received a huge number of odd-sized shoes from their principal supplier last year against which the previous auditors made them set up a reserve. He indicated that, with the exception of the odd-sized shoes, Apollo generally turns over its entire inventory several times a year. As the quantity of odd sizes gradually decreases, the reserve has been decreased by reducing the reserve and Cost of Goods Sold.,This is the observation note that Bradley had. It was in the excel document that I had attached in my first post. If you have any more question, please let me know. If you need additional time, I am able to give you until Wed evening if you need it. Thanks for your help! Date: Mon, 31 DEC 2007 4:43:52 +0000 To: ?Darlene Wardlaw? From: "Bradley Crumpler" Subject: Apollo Shoes Inventory Observation While the ?in-charge? was drinking coffee and scarfing down doughnuts with Karina, I was out in the warehouse counting! This is what I observed: ? I saw the Apollo manager (Andrew Jacobs) giving instructions to the count teams. (I?ve attached a copy to put in the workpapers.) ? Shoe boxes were stacked in pallets. Each pallet was six boxes wide by six boxes deep and stacked 30 boxes high (6X6X30=1080 boxes/pallet). Each pallet included all the same sizes of men?s, women?s and children?s shoes. According to the in-charge?s instructions, I had them open up a number of boxes throughout the warehouse to make sure that shoes were in each of them. Boy, were they upset about that! ? Apollo personnel counted all inventory, including a shipment of shoes costing $8,434,889.09 that was received on December 31. The invoice shows the shipment was made from the Anglonesia Rehabilitation and Reprogramming Institute on December 26, ?FOB Destination.? I attached a copy of the purchase invoice as well as the ones from the previous two purchases. These were the only shipments received in the last several months. I observed a count tag on every pallet. ? There were a total of 98 count sheets. I recounted all the items on seven count sheets (attached). There were no differences between my test counts and those counted by the client. For some reason, the in-charge didn?t want me to let the Apollo people know what I was recounting! ? I found some pallets of shoes stacked near the back of the warehouse (furthest from the shipping dock). They were covered with dust and looked very old. They were men?s size 23. When I asked the inventory foreman about them and whether they had any value, he just started laughing. He said that?s why the ?reserve for inventory obesity? was so high. He said that they shipped out ?a boatload of them (size 23?s) last week.? ? I also spent 4 hours watching them count the supply closet. All the pencils were accounted for. I?m going home. Apollo Shoes Inventory Count Instructions 1. Counts will be performed in teams of two, consisting of a counter and a writer. 2. For each bin, identify the item located in it and the count of that item. If more than one item is in the bin, write in the bin number, the additional item description, and the count in the open space at the bottom of your count sheet. 3. After counting a bin, place an inventory count tag on the bin to mark it as having been counted. 4. After a team finishes its counts, each count team member should write his/her name in the "Count Team" line on each count sheet and the team should then turn in the sheets to the inventory manager. 5. After receiving the count sheets(s), the inventory manager will review and sign them, and then submit them to the inventory clerk for processing. 6. The inventory clerk will enter the counts into the computer system, run a variance report, and submit the variance report to the inventory manager. 7. The inventory manager will assign recounts for variances to the count teams. Each team will then recount the assigned bins and initial beside the recount on the count sheet. 8. The recounts will be resubmitted to the inventory manager, who will review and sign them, and then submit them to the inventory clerk for final entry. 9. There will be NO sales and NO movement of inventory during the count.
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