The next two questions are based on the following information. 1. Strata Co. is a retailer whose shares are publicly traded. During year X1, Strata reported the following quarterly information in its SEC filings. Quarter Q1 Q2 Q3 Q4 Pretax income 100k 130k 140k 180k Taxes(20%) (20k) (26k) (28k) (36k) NI 80k 104k 112k 144k As a retailer, Strata counts it inventory on 6/30 and 12/31 of each year. While observing Strata’s inventory count on 12/31/x1 prior to closing, the auditor discovered that Strata’s ending inventory count was over stated by 30,000 as it included good received from Rapid Co. that were being held on consignment. The auditor went back to the inventory scan records that were made when Strata counted its inventory back on 6/30/x1 and discovered that the same 30,000 good being held on consignment had been counted when calculating Strata’s ending inventory. As a corporation, Strata files quarterly tax returns with the IRS. In response to this information, what accounting entries, if any, should Strata make on 12/21/x1? Debit cost of sales for 30,000 and credit inventory for 30,000 Debit cost of sales for 30,000, debit tax expense for 6,000 and credit inventory for 30,000 and credit taxes payable for 6,000 Debit RE for 30,000 and credit inventory for 30,000 Debit cost of sales for 30,000, debit AR for 6,000, credit in for 30,000 and credit tax exp for 6,000 None of the above After making correcting accounting entries in the previous question, what additional responsibilities does P have under ASC 250 regarding its investment in Strata? P is required to restate consolidated results for q2 P is required to restate consolidated results for q3 P is required to disclose the effects of the Strata error on previously reported results All of the above None of the above

The next two questions are based on the following information. 1. Strata Co. is a retailer whose shares are publicly traded. During year X1, Strata reported the following quarterly information in its SEC filings. Quarter Q1 Q2 Q3 Q4 Pretax income 100k 130k 140k 180k Taxes(20%) (20k) (26k) (28k) (36k) NI 80k 104k 112k 144k As a retailer, Strata counts it inventory on 6/30 and 12/31 of each year. While observing Strata’s inventory count on 12/31/x1 prior to closing, the auditor discovered that Strata’s ending inventory count was over stated by 30,000 as it included good received from Rapid Co. that were being held on consignment. The auditor went back to the inventory scan records that were made when Strata counted its inventory back on 6/30/x1 and discovered that the same 30,000 good being held on consignment had been counted when calculating Strata’s ending inventory. As a corporation, Strata files quarterly tax returns with the IRS. In response to this information, what accounting entries, if any, should Strata make on 12/21/x1? Debit cost of sales for 30,000 and credit inventory for 30,000 Debit cost of sales for 30,000, debit tax expense for 6,000 and credit inventory for 30,000 and credit taxes payable for 6,000 Debit RE for 30,000 and credit inventory for 30,000 Debit cost of sales for 30,000, debit AR for 6,000, credit in for 30,000 and credit tax exp for 6,000 None of the above After making correcting accounting entries in the previous question, what additional responsibilities does P have under ASC 250 regarding its investment in Strata? P is required to restate consolidated results for q2 P is required to restate consolidated results for q3 P is required to disclose the effects of the Strata error on previously reported results All of the above None of the above

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 next two questions are based on the following information.

1. Strata Co. is a retailer whose shares are publicly traded. During year X1, Strata reported the following quarterly information in its SEC filings.

Quarter Q1 Q2 Q3 Q4

Pretax income 100k 130k 140k 180k

Taxes(20%) (20k) (26k) (28k) (36k)

NI 80k 104k 112k 144k

As a retailer, Strata counts it inventory on 6/30 and 12/31 of each year. While observing Strata’s inventory count on 12/31/x1 prior to closing, the auditor discovered that Strata’s ending inventory count was over stated by 30,000 as it included good received from Rapid Co. that were being held on consignment. The auditor went back to the inventory scan records that were made when Strata counted its inventory back on 6/30/x1 and discovered that the same 30,000 good being held on consignment had been counted when calculating Strata’s ending inventory. As a corporation, Strata files quarterly tax returns with the IRS. In response to this information, what accounting entries, if any, should Strata make on 12/21/x1?

Debit cost of sales for 30,000 and credit inventory for 30,000
Debit cost of sales for 30,000, debit tax expense for 6,000 and credit inventory for 30,000 and credit taxes payable for 6,000
Debit RE for 30,000 and credit inventory for 30,000
Debit cost of sales for 30,000, debit AR for 6,000, credit in for 30,000 and credit tax exp for 6,000
None of the above

After making correcting accounting entries in the previous question, what additional responsibilities does P have under ASC 250 regarding its investment in Strata?

P is required to restate consolidated results for q2
P is required to restate consolidated results for q3
P is required to disclose the effects of the Strata error on previously reported results
All of the above
None of the above

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