In 2016, the controller of Sytec Corporation discovered that $42,000 of inventory purchases were incorrectly charged to advertising expense in 2015. In addition, the 2015 year-end inventory count failed to include $30,000 of company merchandise held on consignment by Erin Brothers. Sytec uses a periodic inventory system. Other than the omission of the merchandise on consignment, the year-end inventory count was correct. The amounts of the errors are deemed to be material. Required: 1. Determine the effect of the errors on retained earnings at January 1, 2016. Explain your answer. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors. 3. What other step(s) would be taken in connection with the correction of the errors?

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A: Prepare the journal entries.

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A:

Q: During 2016, WMC Corporation discovered that its ending inventories reported on its financial…

A: 1.

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Q: Farley Bains, an auditor with Nolls CPAs, is performing a review of Splish Brothers Inc.’s Inventory…

A: Prepare a schedule for determining correct inventory as shown below:

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A:

Q: Grocery Ltd is a retailer and sells various products. It follows the perpetual inventory method.…

A: Journal Entry: Economic  and  non-economic  transactions   are recorded  through Journal entry.…

Q: Farley Bains, an auditor with Nolls CPAs, is performing a review of Waterway Company’s Inventory…

A: Prepare a schedule to determine the correct inventory amount as shown below:

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Q: Rachel Warren, an auditor with Laplante CPAS, is performing a review of Pina Colada Corp.'s…

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Q: Tricias, a 90% owner of Trina, sold merchandise at a sales price of P60,000 to Trina during the 2014…

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Q: Platinum Co. failed to record $72,000 credit purchase of goods that were received on the last day of…

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Q: You have been hired as the new controller for the Ralston Company. Shortly after joining the company…

A: 1.

Q: According to its records, the inventory balance at year-end was $37,000. However, the following…

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Q: In 2021, the internal auditors of Development Technologies, Inc., discovered that a $5.6 million…

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Q: Based on its physical count of inventory in its warehouse at year-end, December 31, 2014, Madison…

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Q: BCD Company conducted a physical count on December 31, 2019 which showed inventory with a total cost…

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Q: In 2016, the internal auditors of Development Technologies, Inc. discovered that a $4 million…

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Q: At the end of 2016, the Biggie Company performed its annual physical inventory count. John Lawrence,…

A: Goods in transit:

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Q: The following is an independent error made by a company that uses the periodic inventory system:…

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Q: Farley Bains, an auditor with Nolls CPAS, is performing a review of Teal Mountain Inc.'s Inventory…

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Q: Grocery Ltd is a retailer and sells various products. It follows the perpetual inventory method.…

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Q: The following inventory transactions took place near December 31, 2016, the end of the Rasul…

A: 1.

Q: On April 1, 2020, you were hired by Binus Inc., a closely held company, as a staff member of its…

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Q: Grocery Ltd is a retailer and sells various products. It follows the perpetual inventory method.…

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Q: If Soda Popinski's Company's ending inventory was actually $86,000 but was adjusted at year end to a…

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Q: The following information is presented for Marigold Corporation. The net income figures were…

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Q: As a result of taking a physical inventory count on December 31, 2016, the Mona Lisa Company…

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Q: During 2016, WMC Corporation discovered that its ending inventories reported in its financial…

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Q: The accountant for Angie Company made the following errors related to purchases of merchandise and…

A: Periodic Inventory System means a system of recording and calculating inventory at the end of…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.