Question
Assume the recorded information for a client with a periodic system at 12/31/X1 is as follows: Beg. Inv. 500 Net purchases 800 Goods avail. for
Assume the recorded information for a client with a periodic system at 12/31/X1 is as follows:
Beg. Inv. | 500 |
Net purchases | 800 |
Goods avail. for sale | 1,300 |
End. Inv. (phys count) | -700 |
COGS | 600 |
The client has made the corresponding closing entry.
1. Assume that a purchase of $60 near year end was correctly recorded as a 20X1 purchase, but because the units were not in the warehouse at the time of the physical count, these items were improperly excluded from the physical count.
What adjusting entry is necessary to correct this error?
Hint: Think about any necessary entry in 20X1 that was not recorded, as well as any other mistakes that were made, and think about the impact on the financials.
2. Disregard the information from #1 above. Instead, assume it is discovered that a cut-off error occurred, whereby a purchase of $70 that pertains to 20X1 was not recorded as a purchase until 20X2, and the units of inventory from that purchase were improperly excluded from the physical count.
What adjusting entry is necessary to correct this error?
Hint: Think about any necessary entry in 20X1 that was not recorded, as well as any other mistakes that were made, and think about the impact on the financials.
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