Viewing page 8 of 14

This transcription has been completed. Contact us with corrections.

-2-

validated constituted less than half of the total amounts reported. The following June 30, 1962 data could not be verified:

[[5 columned table]]


Your representative agreed to retain data supporting the information reported on future Schedules P-10.

Amortization of Deferred Sales Tax and Freight Charges

It is your company's accounting practice to record sales tax and freight charges, applicable to purchases of expendable parts, in "Subaccount 1890-02 Undistributed Freight and Taxes." These deferred charges are subsequently amortized monthly to operating expenses at a predetermined rate of 10 per cent of the blanace in Subaccount 1890-02. This rate was presumed to approximate the average rate of transfers (usage from)"Account 1310 Flight Equipment Expendable Parts" to the respective operating expenses. However, our audit tests indicated that the rate of write-off from Account 1310 was only about 7 per cent during the period under current review.

Your representative agreed to adjust the amortization factor in order to reflect a more realistic relationship with the rate of usage of flight equipment expendable parts.