Part B- Prepare the journal entry or entries you would give the bookkeeper to correct the books. Assume the books have not yet been closed for the fiscal year ended March 31, 2018. Disregard correction of income taxes.
Problem 22-10 (Part Level Submission) You have been asked by a client to review the records of Pina Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting records. Your examination reveals the following information. 1. Pina Company commenced business on April 1, 2015, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual statements prepared by the bookkeeper reflect the following income before closing and before deducting income taxes. 2. A relatively small number of machines have been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such. On March 31 of each year, machines billed and in the hands of consignees amounted to SA14 Sales price was determined by adding 25% to cost. Assume that the consigned machines are sold the following year. 3. On March 30, 2017, two machines were shipped to a customer on a C.O.D. basis. The sale was not entered until April 5, 2017, when cash was received for $6,344. The machines were not included in the inventory at March 31, 2017. (Title passed on March 30, 2017.) 4. All machines are sold subject to a 5-year warranty. It is estimated that the expense ultimately to be incurred in connection with the warranty will amount to 12 of 1% of sales. The company has charged an expense account for warranty costs incurred. Sales per books and warranty costs were as follows. S972 600 $1.086 Problem 22-10 (Part Level Submission) You have been asked by a client to review the records of Pina Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting records. Your examination reveals the following information. 1. Pina Company commenced business on April 1, 2015, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual statements prepared by the bookkeeper reflect the following income before closing and before deducting income taxes. 2. A relatively small number of machines have been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such. On March 31 of each year, machines billed and in the hands of consignees amounted to SA14 Sales price was determined by adding 25% to cost. Assume that the consigned machines are sold the following year. 3. On March 30, 2017, two machines were shipped to a customer on a C.O.D. basis. The sale was not entered until April 5, 2017, when cash was received for $6,344. The machines were not included in the inventory at March 31, 2017. (Title passed on March 30, 2017.) 4. All machines are sold subject to a 5-year warranty. It is estimated that the expense ultimately to be incurred in connection with the warranty will amount to 12 of 1% of sales. The company has charged an expense account for warranty costs incurred. Sales per books and warranty costs were as follows. S972 600 $1.086
