Ch06 InventoryPart 2 Inventory ErrorsWorksheet

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Inventory Errors Example 1 Goods received in 2022 were included in December 31 inventory, but the purchase and the liability were not recorded until early 2023. a. This means goods were received and included in Dec. 31 ending inventory - but someone forgot to record the purchase transaction in the books b. Assume this was a $50 purchase and all purchases are made on credit. How were relevant accounts affected for 2022? ( 0 indicates the balance was correct; + indicates overstatement; - indicates understatement) Beg. Inventory + Purchases - End Inventory = COGS What should have been recorded $200 $700 $300 $600 What was recorded Direction of impact Assets (Inv) Liability (A/P) Equity (R/E) Net Income (=Sales-COGS) What should have been recorded $300 $700 $100 $100 (700-600) What was recorded Direction of impact
How were relevant accounts affected for 2023? ( 0 indicates the balance was correct; + indicates overstatement; - indicates understatement) Beg. Inventory + Purchases - End Inventory = COGS What should have been recorded $300 $100 $50 $350 What was recorded Direction of impact Assets (Inv) Liability (A/P) Equity (R/E) Net Income (=Sales-COGS) What should have been recorded $50 $800 $250 $150 (500-350) What was recorded Direction of impact
Inventory Errors Example 2 Goods received in 2023 were included in December 31, 2022 inventory and in 2022 purchases. a. For example, goods were purchased on FOB destination shipping terms - the transaction should not be recorded until the goods are received in 2023 b. Assume this was a $50 purchase, and all purchases are made on credit. How were relevant accounts affected for 2022? ( 0 indicates the balance was correct; + indicates overstatement; - indicates understatement) Beg. Inventory + Purchases - End Inventory = COGS What should have been recorded $200 $700 $300 $600 What was recorded Direction of impact Assets (Inv) Liability (A/P) Equity (R/E) Net Income (=Sales-COGS) What should have been recorded $300 $700 $100 $100 (700-600) What was recorded Direction of impact
How were relevant accounts affected for 2023? ( 0 indicates the balance was correct; + indicates overstatement; - indicates understatement) Beg. Inventory + Purchases - End Inventory = COGS What should have been recorded $300 $100 $50 $350 What was recorded Direction of impact Assets (Inv) Liability (A/P) Equity (R/E) Net Income (=Sales-COGS) What should have been recorded $50 $800 $250 $150 (500-350) What was recorded Direction of impact
Inventory Errors Example 3 Goods were bought in 2022, and the purchase was recorded in that year; however, the goods were not included in the December 31, 2022 inventory as they should have been. a. This means the company did not include this purchase as part of 2022 Ending Inventory - for example, they forgot to count a section of the warehouse b. Assume this was a $50 purchase, and all purchases are made on credit. How were relevant accounts affected for 2022? ( 0 indicates the balance was correct; + indicates overstatement; - indicates understatement) Beg. Inventory + Purchases - End Inventory = COGS What should have been recorded $200 $700 $300 $600 What was recorded Direction of impact Assets (Inv) Liability (A/P) Equity (R/E) Net Income (=Sales-COGS) What should have been recorded $300 $700 $100 $100 (700-600) What was recorded Direction of impact
How were relevant accounts affected for 2023? ( 0 indicates the balance was correct; + indicates overstatement; - indicates understatement) Beg. Inventory + Purchases - End Inventory = COGS What should have been recorded $300 $100 $50 $350 What was recorded Direction of impact Assets (Inv) Liability (A/P) Equity (R/E) Net Income (=Sales-COGS) What should have been recorded $50 $800 $250 $150 (500-350) What was recorded Direction of impact
Inventory Errors Example 4 Goods bought in 2022 were excluded from December 31, 2022 inventory, and the purchase was recorded early in 2023. a. For example, goods were purchased on FOB shipping point terms - the transaction should be recorded in 2022 when the goods ship from the supplier - even though the company has not received them yet b. Assume this was a $50 purchase, and all purchases are made on credit. How were relevant accounts affected for 2022? ( 0 indicates the balance was correct; + indicates overstatement; - indicates understatement) Beg. Inventory + Purchases - End Inventory = COGS What should have been recorded $200 $700 $300 $600 What was recorded Direction of impact Assets (Inv) Liability (A/P) Equity (R/E) Net Income (=Sales-COGS) What should have been recorded $300 $700 $100 $100 (700-600) What was recorded Direction of impact
How were relevant accounts affected for 2023? ( 0 indicates the balance was correct; + indicates overstatement; - indicates understatement) Beg. Inventory + Purchases - End Inventory = COGS What should have been recorded $300 $100 $50 $350 What was recorded Direction of impact Assets (Inv) Liability (A/P) Equity (R/E) Net Income (=Sales-COGS) What should have been recorded $50 $800 $250 $150 (500-350) What was recorded Direction of impact
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