Steffey Ltd. During the 2011 audit of Steffey Ltd.

Steffey Ltd.During the 2011 audit of Steffey Ltd. you have tested the internal controls over inventory, observed the physical inventory taken on December 31, 2011, and performed various followup procedures related to the physical. Now you are performing costing (pricing) tests on a sample of the ending inventory. One of the items you selected for cost (price) testing is orange widget, a significant part in the manufacture of Steffey’s main products, namtips. You noted that the 12/31/11 inventory record of orange widgets consisted of 1,263 units (you previously verified that this agreed to the quantity indicated from the physical inventory) at $782 each for a total of $987,666. When you look at the invoices for the November and December purchases of the orange widgets, you see the following:Date Quantity Unit Price Total 11/03/11 1,000 $765 $ 765,000 11/22/11 500 770 385,000 12/03/11 800 777 621,600 12/28/11 600 782 469,200 Assume you determined that the net realizable value for the orange widgets is $775 per unit, while the net realizable value less a normal margin is $745 per unit. Prepare the adjusting entry, in proper form without an explanation, for the proper presentation of orange widgets at December 31, 2011 assuming you examined a vendor invoice dated January 5, 2012 for 500 orange widgets at $750 each for a total of $375,000. The units were received on January 7, 2012.

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