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Mobile Security, Inc.

Mobile Security, Inc. $($MSI$)$ has been an audit client of Leo & Lee, LLP for the past $12$ years. MSI is a small, publicly

traded aviation company based in Cleveland, Ohio, where it manufactures high$-$tech unmanned aerial vehicles

$($UAV$),$ also known as drones, and other surveillance and security equipment. MSI's products are primarily used

by the military and scientific research institutions, but there is growing demand for UAVs for commercial and

recreational use. MSI must go through an extensive bidding process for large government contracts. Because of

the sensitive nature of government contracts and military product designs, both the facilities and records of MSI

must be highly secured.

In October $2025,$ MSI installed a new cloud$-$based inventory costing system to replace a system that had been

developed in$-$house. The old system could no longer keep up with the complex and detailed manufacturing

costing process that provides information to support competitive bidding. MSI's IT department, together with

consultants from the software company, implemented the new inventory costing system, which went live on

December $1,2025.$ Key operational staff and the internal audit team from MSI were significantly engaged in the

selection, testing, training, and implementation stages.

The inventory costing system uses various manufacturing costing and unit of production inputs to calculate and

produce a database of all product costs and recommended sales prices. It also integrates with the general ledger

each time there are product inventory movements such as purchases, sales, waste, and damaged inventory

losses.

The following list of sales invoices are entered in the sales journal for the months of June $2026$ and July $2026,$

respectively. All goods are shipped FOB shipping point.

June

July

Analysis and evaluation: Analyze the eight transactions shown above. Based on a sales cutoff analysis, record

necessary adjusting journal entries at June $30$ in connection with the foregoing data. $($Credit account titles are

automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No

entry" for the account titles and enter $0$ for the amounts.$)$

Date Account Titles and Explanation

Debit

Credit

June $30$

$($To record the revenues$)$

June $30$

$($To record the cost of goods sold$)$

eTextbook and Media

List of Accounts

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