Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

After going through the accounting records of Dolfin Corporation in detail, the auditor made a list of observations. You have been asked to review the

After going through the accounting records of Dolfin Corporation in detail, the auditor made a list of observations. You have been asked to review the effect of these observations.

For each observation, use checkmarks to identify which items on the income statement are overstated or understated. If none of these items is affected by the observation, check the No Effect box..

Observations

Sales

Cost of Merchandise Sold

Gross Profit

Operating Expenses

Income from Operations

No Effect

Overstated

Understated

Overstated

Understated

Overstated

Understated

Overstated

Understated

Overstated

Understated

All freight costs were charged to Delivery Expense regardless of the terms of sale.
Inventory shrinkage was credited to Miscellaneous Selling Expense.
Customer returns and allowances were sometimes debited to Estimated Returns Inventory and credited to Sales.
While the company accountant was on vacation, the cost of each sale was not recorded for sales transactions.
Sales tax collected on each sale was credited to Cost of Merchandise Sold.
Credit card processing fees were debited to Cost of Merchandise Sold.
Office supplies expense was included in administrative expenses.

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

The Lakeside Company Case Studies In Auditing

Authors: John Trussel, J. Douglas Frazer

12th Edition

0132567253, 978-0132567251

More Books

Students also viewed these Accounting questions

Question

Describe Stage 3 in the CRM cycle: customer feedback AppendixLO1

Answered: 1 week ago

Question

Which of the following best describes a CPU - bound task?

Answered: 1 week ago