Chapter 20, Problem 20.10P

Requirement 1:

To determine

Inventory error

Inventory errors are sometimes caused by making mistake in physical count, in pricing the inventory correctly, or in recognizing the transfer of title for the goods in transit. These inventory errors affect both the income statement as well as balance sheet.

To Analyze: the effect of the errors on 2015 and 2014 cost of goods sold, net income and retained earnings.

Requirement 2:

To determine

To Prepare: journal entry to correct the error.

Requirement 3:

To determine

the other steps that would be taken in connection with the error.