I need help with the audit case below. Please see attachment

BILTRITE PRACTICE CASE

Module XI, substantive testing of plant asset additions and disposals, may be completed at this time.

Module XI: Plant Asset Additions and Disposals In Module IV, you applied MUS sampling procedures in evaluating the correct- ness of a subset of debits to the “Factory Equipment” account. You will recall that the debits to account 1530 totaled $89,860,000 for 2009. You will also recall that Derick decided to stratify the population of debits such that $77,260,000 of major additions, representing replacements of worn-out equipment, was to be audited in detail. In Module XI, you will analyze this subset of additions, as well as disposals. You will also complete the “Plant Assets” lead schedule.

Requirements 1. Using the spreadsheet program and downloaded data, retrieve the file

labeled “Plant.” Locate the following documentation in this file: ● WP 11—Plant assets and accumulated depreciation—lead schedule

(note that AJE 1 from Module IV has already been posted); and ● WP 11.4—Factory equipment—additions and disposals. Scroll to WP 11.4,“Factory Equipment—Additions and Disposals.” What is the nature of the “underlying documentation” referred to in the explanation of audit legends E and W?

2. In recording the 2009 disposals, Janel James, Biltrite’s plant assets accoun- tant, miscalculated the accumulated depreciation on the assets sold and thereby overstated the gain on disposal by $3,090,000. Draft Audit Adjust- ment 10 at the bottom of WP 11.4 to correct for this misstatement. In addition, James did not change the standard journal entry for monthly depreciation to reflect additions and disposals during the year. As a result depreciation expense for the year is understated by $800,000. Biltrite depreciates factory equipment on a straight-line basis over a ten-year esti- mated useful life with zero salvage value. One-half year’s depreciation is taken on all additions and disposals. Draft Audit Adjustment 11 at the bot- tom of WP 11.4 to reflect the depreciation understatement. In recording the under-depreciation, debit account 5300,“Cost of Goods Sold—Pike’s Peak Mountain Bike,” inasmuch as all overhead accounts have been closed. Any further adjustments, therefore, must be reflected in the cost of sales accounts. Although in Module IV we allocated the adjustment to the five product cost of sales accounts, the present adjustment is less significant in amount, and therefore we will reflect the entire amount in account 5300. (Note: Don’t forget to enter Audit Adjustments 1, 10, and 11 in the body of the document to arrive at correct adjusted balances.)

3. Scroll to WP 11,“Plant Assets and Accumulated Depreciation—Lead Schedule.” Post Audit Adjustments 10 and 11 to the lead schedule.

4. Print documentation 11 and 11.4.

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