Maurice Tutor

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    Argosy University/ Phoniex University/
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    Phoniex University
    Oct-2001 - Nov-2016

Category > Applied Sciences Posted 29 Jul 2017 My Price 8.00

Inventory errors

Inventory errors

You have been hired as the new controller for the Ralston Company. Shortly after joining the company in 2016, you discover the following errors related to the 2014 and 2015 financial statements:

a. Inventory at 12/31/2014 was understated by $6,000.

b. Inventory at 12/31/2015 was overstated by $9,000.

c. On 12/31/2015, inventory was purchased for $3,000. The company did not record the purchase until the inventory was paid for early in 2016. At that time, the purchase was recorded by a debit to purchases and a credit to cash.

The company uses a periodic inventory system.

Required:

1. Assuming that the errors were discovered after the 2015 financial statements were issued, analyze the effect of the errors on 2015 and 2014 cost of goods sold, net income, and retained earnings. (Ignore income taxes.)

2. Prepare a journal entry to correct the errors.

3. What other step(s) would be taken in connection with the error?

Answers

Maurice Tutor
(5)
Status NEW Posted 29 Jul 2017 10:07 PM My Price 8.00

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