Assertion

Question 1

It was discovered that a number of the items on hand and counted in the inventory were on consignment.

Answer 1

Rights and Obligations

If the items are on consignment they are not owned by Hillmart and therefore, there is a rights issue

Question 2

In performing a price test of inventory items, you found a number of items priced below cost.

Answer 2

Valuation and Allocation

If the items are not priced at cost there is a valuation issue.

Question 3

Some inventory items owned by the company were in transit during the physical inventory.

Answer 3

Completeness

Inventory in transit may not be included in the inventory on the financial statements, which results in a completeness issue.

Question 4

During the physical inventory it was noted that a number of inventory items were damaged.

Answer 4

Valuation and Allocation

Damaged items should be written down to sales value and thus may present a valuation issue.

Question 5

Inventory items were stored in three different warehouses

Answer 5

No Financial Statement Assertion

The fact that inventory is stored in three different warehouses has no financial statement implications.

Question 6

It appears that the selling price of certain of the company’s products has declined significantly.

Answer 6

Valuation and Allocation

If the price of items has declined there may be an obsolescence issue that may affect valuation