A retail company recently completed a physical count of ending merchandise inventory to use in preparing adjusting

Question:

A retail company recently completed a physical count of ending merchandise inventory to use in preparing adjusting entries. In determining the cost of the counted inventory, company employees failed to consider that $5,000 of incoming goods had been shipped by a supplier on December 31 under an FOB shipping point agreement. These goods had been recorded in Merchandise Inventory as a purchase, but they were not included in the physical count because they were in transit. Explain how this overlooked fact affects the company’s financial statements and the following ratios: return on assets, debt ratio, current ratio, profit margin ratio, and acid-test ratio.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Question Posted: