You are the controller of a rapidly growing mass merchandiser. The company uses a periodic inventory system.
Question:
You are the controller of a rapidly growing mass merchandiser. The company uses a periodic inventory system. As the company has grown and accounting systems have developed, errors have occurred in both the physical count of inventory and the valuation of inventory on the balance sheet. You have been able to identify the following errors as of December 2017:
• In 2015, one of the retail sections was omitted from the physical count of inventory. The error resulted in inventory being understated on December 31, 2015, by approximately $28,700.
• In 2015, one section of the warehouse was counted twice. The error resulted in inventory being overstated on December 31, 2015, by approximately $45,600.
• In 2016, the replacement cost of some inventory was less than the FIFO value used on the balance sheet. The inventory would have been $6,000 less on the balance sheet dated December 31, 2016.
Required
What, if anything, should you do to correct each of these errors? Explain your answers.
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
The first error resulted in an understatement of the ending inventory in 2015 by 28700 Thus cost o...View the full answer
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1337491471
10th edition
Authors: Gary A. Porter, Curtis L. Norton
