E8-24 (L05) (Inventory Errors-Periodic) Ann M. Martin Company makes the following errors during the current year.(Evaluate each case independently and assume ending inventory in the following year is correctly stated.)2. Both ending inventory and purchases and related accounts payable are understated. (Assume this purchase was recordedand paid for in the following year.)InstructionsIndicate the effect of each of these errors on working capital, current ratio (assume that the current ratio is greater than 1),retained earnings, and net income for the current year and the subsequent year.

Effect of error on Working capital of the current and subsequent year:In current year, the Purchases…

Answered: E8-24 (L05) (Inventory Errors-Periodic)…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

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Chapter10: Inventory

Section: Chapter Questions

Problem 14EB: If Barcelona Companys ending inventory was actually $122,000, but the cost of consigned goods, with...

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Unusual income statement items Assume that the amount of each of the following items is material to the financial statements. Classify each item as either normally recurring (NR) or unusual (U) items. If unusual item, then specify if it is a discontinued operations item (DO). a. Interest revenue on notes receivable. b. Gain on sale of segment of the company's operations that manufactures bottling equipment. c.Loss on sale of investments in stocks and bonds. d. Uncollectible accounts expense. e. Uninsured flood loss. (Hood insurance is unavailable because of periodic Hooding in the area.)
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the direct method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the allowance method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
If Barcelona Companys ending inventory was actually $122,000, but the cost of consigned goods, with a cost value of $20,000 were accidentally included with the company assets, when making the year-end inventory adjustment, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?
Lumen INC. is preparing its 2021 year-end financial statements. Prior to any adjustments, inventory is valued at P76,050, based on a physical count. The following information has been found relating to certain inventory transactions.I. Goods valued at P 11,000 are on consignment with a customer. These goods are not included in the P76,050 inventory figure. Which of the following statements is true?a. There is no effect on the 2021 ending inventory.b. 2021 ending inventory is overstated.c. The 2021 net income is overstated.d. The 2021 net income is understated.Please included an explaination.
The following is an independent error made by a company that uses the periodic inventory system: Equipment with a book value of $70,000 and a fair value of $100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for $129,960 was received and recorded at its face value, and a gain of $59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest. What is the journal entry needed to correct the sale of equipment? Ignore income taxesWhat is the journal entry adjustment needed to correct interest related to the note?
After the issuance of the 2021 financial statements, Pine Company discovered a computationalerror of P150,000 in the calculation of the December 31, 2021 inventory. The error resulted in a P150,000 overstatement in the cost of goods sold for the year endedDecember 31, 2021. In October 2022, the entity paid the amount of P500,000 in settlement of litigation instituted againstit during 2021. No provision for this possible loss was made in 2021. The income tax rate is 30%.What adjustment is required to restate retained earnings on January 1, 2022? A. Dr. Inventory 150000 Cr. Retained earnings 105,000 Cr. Income tax Payable 45,000 B. Dr. Inventory 150,000 Cr. Retained Earnings 150,000 C. Dr. Inventory 150,000 Cr. Retained Earnings 150,000 Dr. Litigation loss 500,000 Cr. Cash 500,000
Sheffield Inc. reported total assets of $6407000 and net income of $505000 for the current year. Sheffield determined that inventory was understated by $138000 at the beginning of the year and $58300 at the end of the year. Ignoring income taxes, what is the corrected amount for total assets and net income for the year?
If Wakowski Company's ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any? If no entry is required, select "None" and leave the amount boxes blank.
M7-17 Calculating Effect of Inventory Errors For each of the following scenarios, determine the effect of the error on income in the current period and in the subsequent period. To answer these questions, rely on the inventory equation: Beginning inventory + Purchases - Cost of goods sold = Ending inventory a. Porter Company received a shipment of merchandise costing $32,000 near the end of the ﬁscal year. The shipment was mistakenly recorded at a cost of $23,000. b. Chiu, Inc., purchased merchandise costing $16,000. When the shipment was received, it was determined that the merchandise was damaged in shipment. The goods were returned to the supplier, but the accounting department was not notiﬁed and the invoice was paid. c. After taking a physical count of its inventory, Murray Corporation determined that it had “shrink” of $12,500, and the books were adjusted accordingly. However, inventory costing $5,000 was never counted
E8-11 (Compute FIFO and Average-Cost—Periodic) The following information is related to radios for the Couples Company for the month of July. (on picture below) Assuming that the periodic inventory method is used, compute the inventory cost at July 31 under each of the following cost flow assumptions. (Ignore taxes.) FIFO. Weighted-average. Answer the following questions. Which of the methods used above will yield the highest figure for gross profit for the income statement? Explain why. Which of the methods used above will yield the highest figure for ending inventory for the statement of financial position? Explain why.
The following pretax amounts pertain to Helsinki Company for the yearended December 31, 2021: Sales, P800,000; Distribution andadministrative costs, P84,000; Other income, P40,000; Interest expense, P4,000; Cost of goods sold, P480,000; Correction of priorperiod error (credit), P16,000; Discontinued operations (debit),P40,000; Cumulative effect of change in accounting policy (credit),P28,000; Retained earnings, January 1 (not restated), P160,000; Dividends declared, P12,000; Income tax rate is 30% How much retained earnings would be shown on December 31, 2021 statement of financial position?

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