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Selfers Service Center is a wholly owned subsidiary of Selfers Federated Stores. The company's function is to deliver furniture and appliances sold by the parent and to service electronics and appliances, also sold by the parent company. Selfers Federated Stores, the parent, operates twelve retail outlets in a large tri-county metropolitan area. The service center uses three delivery trucks and fifteen service vehicles for delivering goods and for making service calls related to large appliances and electronic equipment. Customers typically bring small appliances and electronics to the service center for repair.

At January I, 2002, Selfers Service Center reported audited balances of $720,000 and

$350.000 for Trucks" and "Accumulated Depreciation-Trucks,'' respectively. The vehicles consisted of five delivery trucks costing $72.000 each and fifteen service trucks costing

$2--i,000 each. Accumulated depreciation was $200,000 for delivery trucks and $150,000 for service trucks.

The company depreciates all trucks on a straight-line basis. using a six-year life and zero salvage value. One-half year's depreciation is taken in the year of acquisition and in the year of disposal.

During 2002. the following transactions and journal entries were completed by the company.

2/2/02: Sold one delivery truck for $4,000. The truck was fully depreciated at I 2/31/01.

Cash Truck 3/1/02: Bought one delivery truck for $84,000.	$4,000	$4,000
Truck Cash	$84,000	$84,000

3/15/02:

Sold one service truck for $7,000. This truck was purchased 8/15/99 for $24,000 and the accumulated depreciation, according to Selfers subsidiary ledger. at the date of sale was $10,000.

7/25/02:	Cash Truck Bought one service truck for $26,000.	$7,000	$7,000
	Truck	$26,000
	Cash		$26,000
12/31/02:	Recorded depreciation for 2000:
	Four delivery trucks @ $12,000 each =	$48,000
	Fifteen service trucks @ $4,000 each =	$60,000
	Total	$108,000
	Depreciation Expense-Trucks Accumulated Depreciation-Trucks	$108,000	$108,000

Required:

A. Prepare an audit workpaper analyzing the following accounts:

-Trucks

-Accumulated depreciation-trucks

-Depreciation expense-trucks

-Gain (loss) on disposal of trucks

Start with the audited balances at the beginning of the year. Reflect the transactions as they should have been recorded during 2002 to arrive at audited balances at the end of the year. Then compare these with the December 31, 2002 client balances and record necessary audit adjustments.

B. What are the audit objectives for purposes of this exercise? What audit procedures should he applied in meeting these objectives?

C. Add audit legends. Explain them at the bottom of your workpaper. describing the procedures that you identified in (b) above.

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