In early 2022 you are hired as the new Controller for ABC, Co. You discover a variety of inventory errors. ABC uses the periodic method and uses a Purchases account to accumulate inventory purchases during the year. ABC has a 12/31 year end. 1. Purchases in 2020 are overstated by $5,000 since an invoice was entered and paid twice in error. The error was discovered in 2021 and the vendor gave the company a cash refund in 2021 for the overpayment. The company credited Purchases in 2021 when the cash refund was received. 2. Ending inventory at 12/13/20 is understated by $10,000. 3. Purchases in 2021 are understated by $4,000. These items were received in December 2021 but were recorded in purchases in January 2022 when they were paid. 4. Ending inventory at 12/31/21 is understated by $12,000. 5. Ending inventory as reported in the 2021 Annual Report amounted to $600,000. The 2021 Annual Report was issued before the above errors were identified. Prepare the opening balance sheet JE at 1/1/2022 related to the above items and any other correcting JE which may be required in 2022.
In early 2022 you are hired as the new Controller for ABC, Co. You discover a variety of inventory errors. ABC uses the periodic method and uses a Purchases account to accumulate inventory purchases during the year. ABC has a 12/31 year end. 1. Purchases in 2020 are overstated by $5,000 since an invoice was entered and paid twice in error. The error was discovered in 2021 and the vendor gave the company a cash refund in 2021 for the overpayment. The company credited Purchases in 2021 when the cash refund was received. 2. Ending inventory at 12/13/20 is understated by $10,000. 3. Purchases in 2021 are understated by $4,000. These items were received in December 2021 but were recorded in purchases in January 2022 when they were paid. 4. Ending inventory at 12/31/21 is understated by $12,000. 5. Ending inventory as reported in the 2021 Annual Report amounted to $600,000. The 2021 Annual Report was issued before the above errors were identified. Prepare the opening balance sheet JE at 1/1/2022 related to the above items and any other correcting JE which may be required in 2022.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:In early 2022 you are hired as the new Controller for ABC, Co. You discover a variety of inventory errors. ABC uses the periodic method and uses a Purchases account to accumulate inventory purchases during the year. ABC
has a 12/31 year end.
1. Purchases in 2020 are overstated by $5,000 since an invoice was entered and paid twice in error. The error was discovered in 2021 and the vendor gave the company a cash refund in 2021 for the overpayment. The
company credited Purchases in 2021 when the cash refund was received.
2. Ending inventory at 12/13/20 is understated by $10,000.
3. Purchases in 2021 are understated by $4,000. These items were received in December 2021 but were recorded in purchases in January 2022 when they were paid.
4. Ending inventory at 12/31/21 is understated by $12,000.
5. Ending inventory as reported in the 2021 Annual Report amounted to $600,000. The 2021 Annual Report was issued before the above errors were identified.
Prepare the opening balance sheet JE at 1/1/2022 related to the above items and any other correcting JE which may be required in 2022.
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