During the course of the Year 2 audit of Chester Co., the auditor discovered potential cutoff problems that may or may not require adjusting journal entries. For each of the potential cutoff problems indicated below, complete the required journal entries. To prepare each required journal entry: 1. The company shipped merchandise with a carrying amount of $75,000 FOB destination on December 23, Year 2, and recorded the sale and relief of inventory on that date. The customer received the merchandise on December 31, Year 2. The merchandise has a gross profit margin of 10%. Record the necessary Year 2 adjustments, if any. 2. The company shipped merchandise with a carrying amount of $45,000 to a consignee on December 24, Year 2, and recorded the sale and the relief of inventory on that date. The consignee had not sold the merchandise as of January 5, Year 3. The merchandise has a gross profit margin of 10%. Record the necessary Year 2 adjustments, if any. 3. At the beginning of Year 2, the company entered into a 3-year contract to provide services at $30,000 per year. The total contract was $90,000, and services will be provided continuously over the 3-year period. The contract was paid in full on January 1, Year 2, and the company recorded $90,000 as revenue on that date.
During the course of the Year 2 audit of Chester Co., the auditor discovered potential cutoff problems that may or may not require
To prepare each required
1. The company shipped merchandise with a carrying amount of $75,000 FOB destination on December 23, Year 2, and recorded the sale and relief of inventory on that date. The customer received the merchandise on December 31, Year 2. The merchandise has a gross profit margin of 10%. Record the necessary Year 2 adjustments, if any.
2. The company shipped merchandise with a carrying amount of $45,000 to a consignee on December 24, Year 2, and recorded the sale and the relief of inventory on that date. The consignee had not sold the merchandise as of January 5, Year 3. The merchandise has a gross profit margin of 10%. Record the necessary Year 2 adjustments, if any.
3. At the beginning of Year 2, the company entered into a 3-year contract to provide services at $30,000 per year. The total contract was $90,000, and services will be provided continuously over the 3-year period. The contract was paid in full on January 1, Year 2, and the company recorded $90,000 as revenue on that date.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
