The following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs, list the journal entries you think Rite-Aid would have used to do what is described here. You will have to make an educated guess as to what journal entries the company would use to cover up the fraud.  From at least the first quarter of FY 1998 through the first quarter of FY 2000, Rite Aid also made improper adjusting entries known as "gross profit" entries. This practice had the effect of lowering cost of goods sold and accounts payable. These entries caused material overstatements of Rite Aid's net income in each quarterly period in which they were made. In the second quarter of FY 1999, for example, Rite Aid improperly reduced cost of goods sold and accounts payable by approximately $100 million. As a result of these "gross profit" entries alone, Rite Aid overstated pre-tax income by $100 million in the second quarter of FY 1999. In each of the relevant years, the gross profit entries made during the first three quarters of each fiscal year were reversed in the fourth quarter of that fiscal year.

Bergonzi personally determined the gross profit entries without input or review by anyone. These entries were completely unsubstantiated.

The reversal of the gross profit entries described above created an understatement of fourth quarter income that necessitated the recording of new entries in the fourth quarter that would overstate income in the fourth quarter by at least a like amount. Some of these entries were recorded just as the fiscal year was ending or just after the year ended. Rite Aid's reported net income of $143 million for fiscal year 1999 was materially overstated as a result of these entries. In fact, without such entries Rite Aid would have suffered a net loss for FY 1999.