XYZ Inc. has a December 31 year end and had sales of $4 million. To prepare its adjusting entries, it estimated that it incurred $8,000 for its holiday party in December 2016. On February 8, 2017 after the financial statements were released, the final bill was received and paid for $8,700.

Complete any journal entries required relating to the holiday party for XYZ at the below dates assuming XYZ does not use reversing entries:

Dec 31, 2016

Jan 1, 2017

Feb 8, 2017

Repeat (a) (c) above assuming instead that XYZ does use reversing entries.

a) What qualitative characteristic is best being demonstrated that XYZ does not wait for the final party bill before releasing the financial statements for 2016?

Would you be concerned that the 2016 financial statements are incorrect? Why not?