Alpha, Inc., made errors and/or omissions during the current year as described below. Indicate the effect of these errors and omissions on total assets, total liabilities, and net income for the year using the following code: O = overstated, U = understated, N = no effect. Alpha uses a periodic inventory system and a year ending December 31. Ignore income taxes. Error or Omission Total Net Income Total Assets Liabilities Example: Failed to record a cash sale. U N U 1 The purchase of equipment for cash is recorded as a
Alpha, Inc., made errors and/or omissions during the current year as described below. Indicate the effect of these errors and omissions on total assets, total liabilities, and net income for the year using the following code: O = overstated, U = understated, N = no effect. Alpha uses a periodic inventory system and a year ending December 31. Ignore income taxes. Error or Omission Total Net Income Total Assets Liabilities Example: Failed to record a cash sale. U N U 1 The purchase of equipment for cash is recorded as a
Chapter5: Operating Activities: Purchases And Cash Payments
Section: Chapter Questions
Problem 2.1C
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The receipt of money from a bank loan is recorded as a debit to Cash and a credit to Sales.
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Alpha, Inc., made errors and/or omissions during the current year as described below.
Indicate the effect of these errors and omissions on total assets, total liabilities, and net
income for the year using the following code: O = overstated, U = understated, N = no effect.
Alpha uses a periodic inventory system and a year ending December 31. Ignore income taxes.
Error or Omission
Total
Assets
Total
Net
Liabilities
Income
Example: Failed to record a cash sale.
U
N
U
The purchase of equipment for cash is recorded as a
debit to Equipment and a credit to Accounts Payable.
2 Failed to record the purchase of merchandise
(inventory) on account.
1
3 Cash received from a customer in payment of its
existing account is recorded as if the receipt were for
a current period sale.
4
Recorded a credit sale as a debit to Cash and credit to
Sales.
The receipt of money from a bank loan is recorded as
a debit to Cash and a credit to Sales.
6 Failed to record depreciation at the end of the current
period.
Failed to record AJE: Salaries are paid every Friday
for a 5-day work week. The normal weekly payroll is
$40,000. The year end falls on a Tuesday this year.
7
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