Inventory Errors 1. On December 31, ABC Company counted and recorded $500,000 of inventory. This count did not include $80,000 of goods in transit, shipped to ABC Company on December 29, FOB shipping point. ABC Company recorded the purchase correctly on December 29 when the goods were shipped. A. Determine the correct December 31 inventory balance. B. Identify any accounts that are in error, and state the amount and direction (overstatement or understatement) of the error.
Inventory Errors 1. On December 31, ABC Company counted and recorded $500,000 of inventory. This count did not include $80,000 of goods in transit, shipped to ABC Company on December 29, FOB shipping point. ABC Company recorded the purchase correctly on December 29 when the goods were shipped. A. Determine the correct December 31 inventory balance. B. Identify any accounts that are in error, and state the amount and direction (overstatement or understatement) of the error.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Inventory Errors
1. On December 31, ABC Company counted and recorded $500,000 of inventory. This count did not include $80,000 of goods in transit, shipped to ABC Company on December 29, FOB shipping point. ABC Company recorded the purchase correctly on December 29 when the goods were shipped.
A. Determine the correct December 31 inventory balance.
B. Identify any accounts that are in error, and state the amount and direction (overstatement or understatement) of the error.
Explain for each answer please, I don't understand.
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