4.1 1) You are engaged in the audit of the December 31, financial...
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Accounting
4.1
1) You are engaged in the audit of the December 31, financial statements of Epworth Products Corporation. You are attempting to verify the costing of the work-in-process and finished goods ending inventories that were recorded on Epworth's books as follows: Units Cost Work-in-process (50 percent complete as to labor and overhead 300,000 $860,960 Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60 percent of direct labor costs. Epworth uses the FIFO costing method. A review of Epworth's January inventory cost records disclosed the following information: Units Materials Labor 200,000 $200,000 $315,000 Work-in-process beginning inventory (80% complete for labor & overhead) Units started Units completed Current period costs 1,000,000 900,000 1,300,000 1,991,375 Required: Prepare a production cost report to verify the inventory balances. What is the amount of potential understatement or overstatement of the ending work-in-process account
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