Your client, Edgartown Corporation, provided the following schedule of land, buildings, and equipment for the audit of financial statements for the year
ended December 31, 2019:
Account Description
1/1/19
Beginning Balance Additions Disposals
12/31/19
Ending Balance
Land $ 7,500,000 — — $ 7,500,000
Building–Office 27,000,000 $250,000 — 27,250,000
Production equipment 2,345,000 178,223 $ 34,779 2,488,444
Office equipment 1,765,881 72,517 55,339 1,783,059
IT hardware 216,542 — 19,098 197,444
Total $38,827,423 $500,740 $109,216 $39,218,947
Required
Required
In-class
Discussion
672Part 4 / APPLICATION OF THE AUDIT PROCESS TO OTHER CYCLES
a. What type of evidence would you examine to support the beginning balances in the
accounts?
b. What types of evidence would you use to support the additions to each account?
How might the sources of evidence differ for additions to the building account and
the equipment accounts?
c. What types of evidence would you examine to support equipment disposals?
d. What procedures would you perform related to the ending balances in the accounts?
e. In the audit of property, plant, and equipment accounts, auditors should consider
whether there are any implications to other accounts in the audit.
(1) What other accounts might be impacted by the additions of buildings and
equipment?
(2) What other accounts might be impacted by disposals of equipment?
