2. ABC Company left the sales journal open after year end for two extra days and included the January 1 & 2 sales in the December 31 totals. The company uses perpetual inventory system. What effect would this have on the 2018 financial statements? Assume that the client made the following actual credit sales and received cash receipts as follows after 12/29/20: COGS Cash Receipts (Reciyxables Only) 7,500.00 6,750.00 SALES 12/30/2020 11,250.00 6,000.00 12/31/2020 7,750.00 3,500.00 1/1/2021 6,000.00 2,000.00 1/2/2021 5,700.00 1,500.00 4,500.00 3,700.00 ABC Company has the following balances at 12/29/20: a. Cash $115,000 b. Accounts Receivable $55,000 c. Sales $150,000 d. Cost of Goods Sold $61,000 e. Inventory $75,000 Determine the overstatements and understatements that would result from the following situations. Assume that each situation is independent of one another. In the case of a perpetual inventory, assume that the year-end inventory count did not identify and correct the misstatements. Incorrect Account Correct Balance Overstated, Understated or Amount of Account Balance (Amount Error Recorded) Correct Accounts Receivable Inventory Sales Cost of Goods Sold Gross Profit
2. ABC Company left the sales journal open after year end for two extra days and included the January 1 & 2 sales in the December 31 totals. The company uses perpetual inventory system. What effect would this have on the 2018 financial statements? Assume that the client made the following actual credit sales and received cash receipts as follows after 12/29/20: COGS Cash Receipts (Reciyxables Only) 7,500.00 6,750.00 SALES 12/30/2020 11,250.00 6,000.00 12/31/2020 7,750.00 3,500.00 1/1/2021 6,000.00 2,000.00 1/2/2021 5,700.00 1,500.00 4,500.00 3,700.00 ABC Company has the following balances at 12/29/20: a. Cash $115,000 b. Accounts Receivable $55,000 c. Sales $150,000 d. Cost of Goods Sold $61,000 e. Inventory $75,000 Determine the overstatements and understatements that would result from the following situations. Assume that each situation is independent of one another. In the case of a perpetual inventory, assume that the year-end inventory count did not identify and correct the misstatements. Incorrect Account Correct Balance Overstated, Understated or Amount of Account Balance (Amount Error Recorded) Correct Accounts Receivable Inventory Sales Cost of Goods Sold Gross Profit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:2. ABC Company left the sales journal open after year end for two extra days and included the
January 1 & 2 sales in the December 31 totals. The company uses perpetual inventory system.
What effect would this have on the 2018 financial statements?
Assume that the client made the following actual credit sales and received cash receipts as
follows after 12/29/20:
Cash Receipts (Besixakles Only)
7,500.00
SALES
COGS
12/30/2020 11,250.00 6,000.00
12/31/2020 7,750.00 3,500.00
6,750.00
1/1/2021 6,000.00 2,000.00
1/2/2021 5,700.00 1,500.00
4,500.00
3,700.00
ABC Company has the following balances at 12/29/20:
a. Cash $115,000
b. Accounts Receivable $55,000
c. Sales $150,000
d. Cost of Goods Sold $61,000
e. Inventory $75,000
Determine the overstatements and understatements that would result from the following
situations. Assume that each situation is independent of one another. In the case of a perpetual
inventory, assume that the year-end inventory count did not identify and correct the
misstatements.
Incorrect
Account
Correct
Balance
Overstated,
Amount of
Account
(Amount
Recorded)
Balance
Understated or
Error
Correct
Accounts Receivable
Inventory
Sales
Cost of Goods Sold
Gross Profit
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