Scenario 1:Rocky Inc hired a new intern from CSU to help with year-end inventory. The intern computed the inventory counts at the end of 2020 and 2021. However, the intern's manager, a UNC grad, noticed that the ending inventory did not include inventory on consignment to a retail customer of $3,000 at the end of year 2020 and $6,000 at the end of year 2021. What was the effect of the error (if any] on 2021's statements (amount and whether it was under- ( too low) or over-stated (too high)? If there is no effect, put OK

Scenario 1:Rocky Inc hired a new intern from CSU to help with year-end inventory. The intern computed the inventory counts at the end of 2020 and 2021. However, the intern's manager, a UNC grad, noticed that the ending inventory did not include inventory on consignment to a retail customer of $3,000 at the end of year 2020 and $6,000 at the end of year 2021. What was the effect of the error (if any] on 2021's statements (amount and whether it was under- ( too low) or over-stated (too high)? If there is no effect, put OK

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 13EB: If a group of inventory items costing $3,200 had been double counted during the year-end inventory...

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Company Edgar reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 12,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
If a group of inventory items costing $3,200 had been double counted during the year-end inventory count, what impact would the error have on the following inventory calculations? Indicate the effect (and amount) as either (a) none, (b) understated $______, or (c) overstated $______. Table 10.2
Errors As controller of Lerner Company, which uses a periodic inventory system, you discover the following errors in the current year: 1. Merchandise with a cost of 17,500 was properly included in the final inventory, but the purchase was not recorded until the following year. 2. Merchandise purchases are in transit under terms of FOB shipping point. They have been excluded from the inventory, but the purchase was recorded in the current year on the receipt of the invoice of 4,300. 3. Goods out on consignment have been excluded from inventory. 4. Merchandise purchases under terms FOB shipping point have been omitted from the purchases account and the ending inventory. The purchases were recorded in the following year. 5. Goods held on consignment from Talbert Supply Co. were included in the inventory. Required: For each error, indicate the effect on the ending inventory and the net income for the current year and on the net income for the following year.
An understatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-2, assuming no other errors.
Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statements
Redford Company hired a new store manager in October 2021, who determined the ending inventory on December 31, 2021, to be $66,000. In March, 2022, the company discovered that the December 31, 2021 ending inventory should have been $75,600. The December 31, 2022, inventory was correct. (Assume that the errors were not corrected until after 2022.) Ignore income taxes. Required: Complete the following table to show the effects of the inventory error on the four amounts listed. Give the amount of the discrepancy and indicate whether it was overstated, understated or no effect. Year 2021 2022 Ending Inventory 9,600 Understated Cost of Goods Sold Net Income
You have been hired as the new controller for the Ralston Company. Shortly after joining the company in 2021, you discover the following errors related to the 2019 and 2020 financial statements: Inventory at December 31, 2019, was understated by $6,100. Inventory at December 31, 2020, was overstated by $9,100. On December 31, 2020, inventory was purchased for $3,100. The company did not record the purchase until the inventory was paid for early in 2021. At that time, the purchase was recorded by a debit to purchases and a credit to cash. The company uses a periodic inventory system.Required:1. Assuming that the errors were discovered after the 2020 financial statements were issued, analyze the effect of the errors on 2020 and 2019 cost of goods sold, net income, and retained earnings. (Ignore income taxes.)2. Prepare a journal entry to correct the errors.
The accountant for Suzanne Company made the following errors related to inventory in 2020: 1. The beginning inventory for 2020 was overstated by $1,375 due to an error in the physical count. 2. A $1,650 purchase of merchandise on credit in 2020 was not recorded or included in the ending inventory. Assuming a periodic inventory system, how would Sue's cost of goods sold, gross profit, and net income be affected in 2020 by these errors? Set Cost of Goods Sold Gross Profit Net Income I. Overstated Understated Understated II. Overstated Understated No effect III. Understated Overstated Overstated IV. No effect No effect No effect a. Set I b. Set II c. Set III d. Set IV
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Q: Which misstatement below is more difficult to detect? Explain.(i)The inventory costing $ 150,000 being ordered by customers before the year end was excluded from the ending inventory balance as they are set aside for delivery after year end. The ending balance of inventory as on the statement of financial position was $ 600,000.(ii) Inventory list shows 40 boxes of rice but only 38 boxes were found in the warehouse.(iii) The inventory has a cost of $600,000 and realizable value of $540,000 as the items are outdated. The ending balance of inventory as on the statement of financial position was $ 600,000.
The accountant for Lee Company made the following errors related to merchandise inventory in 2020: 1. The beginning inventory for 2020 was overstated by $750 due to an error in the physical count.2. A $1,300 purchase of merchandise on credit was not recorded and was not included in the ending inventory. Assuming a periodic inventory system, Lee Company's 2020 cost of goods sold will bea. understated by $550.b. understated by $2,050.c. overstated by $2,050.d. overstated by $750.
A firm recorded it's ending inventory for the previous year at $40,000. It realized at the end of the first quarter of the current year that the number was misstated and should actually be $30,000. What corrective entries need to occur to ensure net income is not affected at the end of the current year? There are no corrections to be made. The firm should account for the misstated inventory in a separate cost of goods sold entry. There is no way to fix the entry and the net income will remain affected. The firm should account for the misstated inventory at the end of the current year.