Indicate in each of the spaces provided the effect of the described errors on the various elements of a company's financial statements. All sales and purchases are on credit. Assume a periodic inventory system. Use the following codes: O = amount is overstated; U amount is understated; NE = no effect. 1. Excluded goods in rented warehouse from inventory count. 2. Goods Sold were shipped and appropriately excluded from ending inventory but sale was not recorded. 3. Goods sold in transit shipped "f.o.b. shipping point" were not recorded as a sale and were included in ending inventory. 4. Goods purchased in transit shipped "f.o.b. destination" by a supplier were recorded as a purchase but were excluded from ending inventory. a 5. Goods held consignment from consignor were recorded as a purchase and included in ending inventory count. on Accounts receivable Inventory Accounts payable Sales Cost of goods sold Net income

Indicate in each of the spaces provided the effect of the described errors on the various elements of a company's financial statements. All sales and purchases are on credit. Assume a periodic inventory system. Use the following codes: O = amount is overstated; U amount is understated; NE = no effect. 1. Excluded goods in rented warehouse from inventory count. 2. Goods Sold were shipped and appropriately excluded from ending inventory but sale was not recorded. 3. Goods sold in transit shipped "f.o.b. shipping point" were not recorded as a sale and were included in ending inventory. 4. Goods purchased in transit shipped "f.o.b. destination" by a supplier were recorded as a purchase but were excluded from ending inventory. a 5. Goods held consignment from consignor were recorded as a purchase and included in ending inventory count. on Accounts receivable Inventory Accounts payable Sales Cost of goods sold Net income

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The accountant for the Fred Company did not record a purchase of merchandise on credit or include the items in the ending inventory. The effect of these omissions on assets, liabilities, and retained earnings would be (assume a periodic inventory system): Assets Liabilities Retained Earnings a. Understate Understate Understateb. Understate Understate No effectc. No effect Understate No effectd. Understate No effect Understate
A retail business like Best Buy experiences some loss of inventory due to shoplifting, employee theft, or errors. The difference between the physical inventory count at the end of the accounting period and the balance of Merchandise Inventory in the accounting records is called ___________. Group of answer choices inventory reduction. inventory theft. inventory loss. inventory shrinkage or inventory shortage.
Petco Inc. uses the periodic inventory system. Assess the effect on net income of including goods in transit f.o.b shipping point in purchases, but not in ending inventory. a. Overstate net income. b. No effect on net income. O c. Not sufficient information is provided to assess the effect on net income. O d. Understate net income.
Which of the following statements is true for a company that uses a periodic inventory system? a.The purchase of inventory requires a debit to Inventory. b.The return of defective inventory requires a debit to Purchase Returns and Allowances. c.The payment of a purchase within the discount period requires a credit to Purchase Discounts. d.Any amounts paid for freight are debited to Inventory.