2. While testing the inventory counts, the auditors noticed that several high dollar items had counts on the inventory listing which were materially higher than the actual counts. The difference between the actual and recorded inventory value was $47,000. EARNINGS MANAGEMENT AND FRAUD PROJECT ACCT 312: Spring 2020 You have just been hired as the controller for Wholesale Corp. The last controller left suddenly. The day after you started work, the president of the corporation called you into the office to discuss a preliminary draft of the December 31, 2019 financial statements. The statements reported a net operating loss of $21,000. The president was quite upset and wanted to know what you could do to "make them look better." The president was planning to go to the bank to discuss obtaining a new line of credit and was afraid that the request would be turned down because of the loss. You responded that you would check things out and see what you could do. (Hint: Things might get much worse) In the course of your account analysis, you became aware of several issues. Please complete the following project for the year ended December 31, 2019. (Do not prepare any descriptions or journal entries that should be made for January 2020) Part 1: Prepare any necessary adjusting journal entries and determine the effect of each entry on net income (record in the format noted below). The income (loss) per the trial balance and the effect of the adjusting journal entries should be totaled after the last entry. This project must be typed. I strongly suggest that you show me your journal entries and the related effects on income before handing in the project. Note: The company uses the periodic inventory method. Again, only address what should be done for the year-ended December 31, 2019, DR CR Effect on net income (21,000) AJE +/- amount by line Description Income per trial balance Acct name Acct name xx Reminders: Only income statement accounts affect income. A DR to any income statement account will reduce income. A CR to any income statement account will increase income. nge y sense20arid Tela ditilities: raiud 2. While testing the inventory counts, the auditors noticed that several high dollar items had counts on the inventory listing which were materially higher than the actual counts. The difference between the actual and recorded inventory value was $47,000. EARNINGS MANAGEMENT AND FRAUD PROJECT ACCT 312: Spring 2020 You have just been hired as the controller for Wholesale Corp. The last controller left suddenly. The day after you started work, the president of the corporation called you into the office to discuss a preliminary draft of the December 31, 2019 financial statements. The statements reported a net operating loss of $21,000. The president was quite upset and wanted to know what you could do to "make them look better." The president was planning to go to the bank to discuss obtaining a new line of credit and was afraid that the request would be turned down because of the loss. You responded that you would check things out and see what you could do. (Hint: Things might get much worse) In the course of your account analysis, you became aware of several issues. Please complete the following project for the year ended December 31, 2019. (Do not prepare any descriptions or journal entries that should be made for January 2020) Part 1: Prepare any necessary adjusting journal entries and determine the effect of each entry on net income (record in the format noted below). The income (loss) per the trial balance and the effect of the adjusting journal entries should be totaled after the last entry. This project must be typed. I strongly suggest that you show me your journal entries and the related effects on income before handing in the project. Note: The company uses the periodic inventory method. Again, only address what should be done for the year-ended December 31, 2019, DR CR Effect on net income (21,000) AJE +/- amount by line Description Income per trial balance Acct name Acct name xx Reminders: Only income statement accounts affect income. A DR to any income statement account will reduce income. A CR to any income statement account will increase income. nge y sense20arid Tela ditilities: raiud