FINANCIAL STATEMENT EFFECTS OF ERRORS AND ERROR CORRECTION.

The accountant for Merchant’s Supply Company discovered that a $2,700 purchase of office supplies on credit from Office Depot, made in 19x8, had been recorded incorrectly with the following entry:

REQUIRED:
1. If this error is not declared prior to the end of 19x8, how will the 19x8 financial statements be affected? Assume that there are no taxes.
2. Prepare a correcting entry as of December 31, 19x8.

Transcribed Image Text:

Accounts Payable Cash 2,700 2,700 Later, when Office Depot submitted a $2,700 invoice, the $2,700 was paid. The $2,700 payment was recorded with the following entry: Accounts Payable Cash 2,700 2,700