Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A new accountant who tried to prepare Baseline's financial statements at the end of the current year made several errors. Required: For each of the

A new accountant who tried to prepare Baseline's financial statements at the end of the current year made several errors.

Required:

For each of the following items, indicate how the income statement and statement of financial position are affected by the error and the nature of the effect. (For example, an error might cause revenues and net income on the income statement and retained earnings and assets on the statement of financial position to be overstated). Ignore the effects of income taxes.

  1. The company had sales for cash of $3,000,000. It also had sales on account of $1,800,000 that had been collected by the end of the year, and sales on account of $200,000 that are expected to be collected early the following year. The accountant reported total sales revenue of $4,800,000.

b) The company had total inventories of $600,000 at the end of the year. Of this amount, inventory reported at $30,000 was obsolete and will have to be scrapped. The statement of financial position prepared by the accountant showed total inventories of $600,000.

c) The company has a bank loan for which interest expense during the year of $10,000 will be paid early in January of the next year. The accountant did not record either the interest expense or the related liability.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Organizational Communication A Handbook Of Research Theory And Practice

Authors: Owen Hargie, Dennis Tourish

2nd Edition

0415414466, 978-0415414463

More Books

Students also viewed these Accounting questions

Question

Change Management Simulation: Power and Influence scenerio 1

Answered: 1 week ago

Question

define the term outplacement

Answered: 1 week ago

Question

describe the services that an outplacement consultancy may provide.

Answered: 1 week ago