INVENTORIES You are examining the financial statements of DON JOHN CORPORATION which ends on December 31. DON JOHN CORP. uses the physical inventory system of accounting for inventory. In the course of your examination, you discovered the errors below. Goods received in January 2005 were recorded as purchase on account in December 2004. The goods were included in the 2004 ending inventory. The inventory at December 31, 2004 is understated as a result of errors in physical count. Goods received in December 2004 were recorded as purchases when paid in 2005. The goods were excluded from the 2004 ending inventory. The inventory at December 31, 2004 is overstated as a result of the inclusion of goods acquired on consignment. Goods received in January 2005 were recorded as purchase on account in December 2004. The goods were excluded from the 2004 ending inventory. Goods received in December 2004 were recorded as purchases when paid in 2005. The goods were included in the 2004 ending inventory. Enter the effect of the errors in the solution guide below. Use the following symbols: O-Overstated, U-Understated X-No effect 1 2 3 4 5 6 Income Statement- 2004 Purchases ____ ____ ____ _____ _____ _____ Cost of Sales ____ ____ ____ _____ _____ _____ Net income ____ ____ ____ _____ _____ _____ Balance Sheet- December 31, 2004 Inventory ____ ____ ____ _____ _____ _____ Accounts Payable ____ ____ ____ _____ _____ _____ RE before closing ____ ____ ____ _____ _____ _____ RE after closing ____ ____ ____ _____ _____ _____ Income Statement- 2005 Purchases ____ ____ ____ _____ _____ _____ Beginning inventory ____ ____ ____ _____ _____ _____ Ending inventory ____ ____ ____ _____ _____ _____ Cost of Sales ____ ____ ____ _____ _____ _____ Net income ____ ____ ____ _____ _____ _____ Balance Sheet- December 31, 2005 Inventory ____ ____ ____ _____ _____ _____ Accounts Payable ____ ____ ____ _____ _____ _____ RE before closing ____ ____ ____ _____ _____ _____ RE after closing ____ ____ ____ _____ _____ _____
INVENTORIES
- You are examining the financial statements of DON JOHN CORPORATION which ends on December 31. DON JOHN CORP. uses the physical inventory system of accounting for inventory. In the course of your examination, you discovered the errors below.
- Goods received in January 2005 were recorded as purchase on account in December 2004. The goods were included in the 2004 ending inventory.
- The inventory at December 31, 2004 is understated as a result of errors in physical count.
- Goods received in December 2004 were recorded as purchases when paid in 2005. The goods were excluded from the 2004 ending inventory.
- The inventory at December 31, 2004 is overstated as a result of the inclusion of goods acquired on consignment.
- Goods received in January 2005 were recorded as purchase on account in December 2004. The goods were excluded from the 2004 ending inventory.
- Goods received in December 2004 were recorded as purchases when paid in 2005. The goods were included in the 2004 ending inventory.
Enter the effect of the errors in the solution guide below. Use the following symbols: O-Overstated, U-Understated X-No effect
1 2 3 4 5 6
Income Statement- 2004
Purchases ____ ____ ____ _____ _____ _____
Cost of Sales ____ ____ ____ _____ _____ _____
Net income ____ ____ ____ _____ _____ _____
Inventory ____ ____ ____ _____ _____ _____
Accounts Payable ____ ____ ____ _____ _____ _____
RE before closing ____ ____ ____ _____ _____ _____
RE after closing ____ ____ ____ _____ _____ _____
Income Statement- 2005
Purchases ____ ____ ____ _____ _____ _____
Beginning inventory ____ ____ ____ _____ _____ _____
Ending inventory ____ ____ ____ _____ _____ _____
Cost of Sales ____ ____ ____ _____ _____ _____
Net income ____ ____ ____ _____ _____ _____
Balance Sheet- December 31, 2005
Inventory ____ ____ ____ _____ _____ _____
Accounts Payable ____ ____ ____ _____ _____ _____
RE before closing ____ ____ ____ _____ _____ _____
RE after closing ____ ____ ____ _____ _____ _____
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