INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Chapter 20, Problem 20.10P
Inventory errors
• LO20–6
You have been hired as the new controller for the Ralston Company. Shortly after joining the company in 2018, you discover the following errors related to the 2016 and 2017 financial statements:
a. Inventory at 12/31/2016 was understated by $6,000.
b. Inventory at 12/31/2017 was overstated by $9,000.
c. On 12/31/2017, inventory was purchased for $3,000. The company did not record the purchase until the inventory was paid for early in 2018. At that time, the purchase was recorded by a debit to purchases and a credit to cash.
The company uses a periodic inventory system.
Required:
1. Assuming that the errors were discovered after the 2017 financial statements were issued, analyze the effect of the errors on 2017 and 2016 cost of goods sold, net income, and
2. Prepare a
3. What other step(s) would be taken in connection with the error?
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Vikrambahi
Question 9
(i) Periodic inventory system is less commonly used by companies due to:
A: the complexity in recording the sales and purchases of inventory.
B: the ban of the use by the accounting systems.
C: extra effort in performing the stock taking every month.
D: less updated information on inventory provided during the year.
(ii) Paul Company uses its periodic inventory system and you are given the following information:
Sales.... . . . . . . ........................................................$65,100
Inventory- Beginning...........................................$16,800
Inventory- Ending.... . . . . . . . . . . . . . . . . . . . .$14,700
Purchases... . . . . . . . . . . . . . . . . .................... . .$48,300
How much is the gross profit?
A: $14,700.
B: $50,400.
C: $48,300.
D: $65,100.
Chapter 8 Perform (ASAC LO 5 and BSAC LO 2)
Kingbird Company began operations late in 2024 and adopted the conventional retail inventory method.
Because there was no beginning inventory for 2024 and no markdowns during 2024, the ending inventory
for 2024 was $13,708 under both the conventional retail method and the LIFO retail method. At the end of
2025, management wants to compare the results of applying the conventional and LIFO retail methods.
There was no change in the price level during 2025. The following data are available for computations.
Cost
Inventory, January 1, 2025
Sales revenue
Net markups mu
Net markdowns mo
Purchases
Freight-in
Estimated theft
(b) The LIFO retail method.
Ending inventory at cost
Ending inventory at retail
Cost
$
$13,708
$
63,900
5,888
Retail
Compute the cost of the 2025 ending inventory under both:
(a) The conventional retail method.
$20,200
77,000 mu
9,900 mD
1,800 ex Beg
Ending inventory using the conventional retail method $
87,500
2,200
27336
40800…
Chapter 20 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
Ch. 20 - Prob. 20.1QCh. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3QCh. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8QCh. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...
Ch. 20 - Prob. 20.11QCh. 20 - Describe the process of correcting an error when...Ch. 20 - Prob. 20.13QCh. 20 - If it is discovered that an extraordinary repair...Ch. 20 - Prob. 20.15QCh. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; average cost method...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 Irwin, Inc.,...Ch. 20 - Prob. 20.5BECh. 20 - Book royalties LO204 Three programmers at Feenix...Ch. 20 - Warranty expense LO204 In 2017, Quapau Products...Ch. 20 - Change in estimate; useful life of patent LO204...Ch. 20 - Prob. 20.9BECh. 20 - Error correction LO206 In 2018, internal auditors...Ch. 20 - Prob. 20.11BECh. 20 - Error correction LO206 In 2018, the internal...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change from the treasury stock method to retired...Ch. 20 - Change in principle; change to the equity method ...Ch. 20 - Prob. 20.5ECh. 20 - FASB codification research LO202 Access the FASB...Ch. 20 - Change in principle; change in inventory cost...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 For...Ch. 20 - Change in depreciation methods LO203 The Canliss...Ch. 20 - Book royalties LO204 Dreighton Engineering Group...Ch. 20 - Loss contingency LO204 The Commonwealth of...Ch. 20 - Warranty expense LO204 Woodmier Lawn Products...Ch. 20 - Prob. 20.15ECh. 20 - Accounting change LO204 The Peridot Company...Ch. 20 - Change in estimate; useful life and residual value...Ch. 20 - Classifying accounting changes LO201 through...Ch. 20 - Error correction; inventory error LO206 During...Ch. 20 - Error corrections; investment LO206 Required: 1....Ch. 20 - Prob. 20.21ECh. 20 - Prob. 20.22ECh. 20 - Prob. 20.23ECh. 20 - Inventory errors LO206 Indicate with the...Ch. 20 - Classifying accounting changes and errors LO201...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - P 20-2 Change in principle; change in method of...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - Change in inventory methods LO202 The Rockwell...Ch. 20 - Change in inventory methods LO202 Fantasy...Ch. 20 - Change in principle; change in depreciation...Ch. 20 - Depletion; change in estimate LO204 In 2018, the...Ch. 20 - Accounting changes; six situations LO201, LO203,...Ch. 20 - Prob. 20.9PCh. 20 - Inventory errors LO206 You have been hired as the...Ch. 20 - Error correction; change in depreciation method ...Ch. 20 - Accounting changes and error correction; seven...Ch. 20 - Prob. 20.13PCh. 20 - Prob. 20.14PCh. 20 - Prob. 20.15PCh. 20 - Prob. 20.16PCh. 20 - Prob. 20.17PCh. 20 - Integrating Case 201 Change to dollar-value LIFO ...Ch. 20 - Prob. 20.2BYPCh. 20 - Prob. 20.3BYPCh. 20 - Analysis Case 204 Change in inventory methods;...Ch. 20 - Prob. 20.5BYPCh. 20 - Prob. 20.6BYPCh. 20 - Analysis Case 208 Various changes LO201 through...Ch. 20 - Analysis Case 209 Various changes LO201 through...Ch. 20 - Prob. 20.10BYPCh. 20 - Prob. 20.11BYPCh. 20 - Prob. 20.12BYPCh. 20 - Prob. 1CCTC
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Error in inventory During 2016, the accountant discovered that the physical inventory at the end of 2015 had been understated by 42,750. Instead of correcting the error, however, the accountant assumed that the error would balance out (correct itself) in 2016. Are there any flaws in the accountants assumption? Explain.arrow_forwardPlease do not give solution in image format thankuarrow_forwardPROBLEM 17 On January 15, 2020, a strong monsoon hit the country and destroyed all the inventory of Aeirron Company stored in the warehouse. The following information is available from the records of the company's periodic inventory system: ww Beginning inventory Purchases, January1 to January 15, 2020 Sales, January 1 to January 15, 2020 P1,000.000 500,000 800,000 The following are the past performance of Aeirron Company: 2019 2018 Sales P4,500,000 P4,100,000 Cost of Sales 2,300,000 2,500,000 Requirements: 1. Compute the gross profit rate of the company for the pastyears. 2. Compute the inventory lost in monsoon.arrow_forward
- Problem 9-15 (Algo) Inventory errors [LO9-7] You have been hired as the new controller for the Ralston Company. Shortly after joining the company in 2021, you discover the following errors related to the 2019 and 2020 financial statements a. Inventory at December 31, 2019, was understated by $6,500. b. Inventory at December 31, 2020, was overstated by $9,500 c. On December 31, 2020, inventory was purchased for $3,500. The company did not record the purchase until the inventory was paid for early in 2021. At that time, the purchase was recorded by a debit to purchases and a credit to cash. The company uses a periodic inventory system. Required: 1. Assuming that the errors were discovered after the 2020 financial statements were issued, analyze the effect of the errors on 2020 and 2019 cost of goods sold, net income, and retained earnings. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors. Complete this question by entering your answers in the tabs below.arrow_forwardanswers all and give solutions and explaination in eacharrow_forwardEffects of an Inventory Error The income statements for Graul Corporation for the 3 years ending in 2019 appear below. During 2019, Graul discovered that the 2017 ending inventory had been misstated due to the following two transactions being recorded incorrectly. a. A purchase return of inventory costing $42,000 was recorded twice. b. A credit purchase of inventory' made on December 20 for $28,500 was not recorded. The goods were shipped F.O.B. shipping point and were shipped on December 22, 2017. Required: 1. Was ending inventory for 2017 overstated or understated? By how much? 2. Prepare correct income statements for all 3 years. 3. CONCEPTUAL CONNECTION Did the error in 2017 affect cumulative net income for the 3-year period? Explain your response. 4. CONCEPTUAL CONNECTION Why was the 2019 net income unaffected?arrow_forward
- Inventory Errors McLelland Inc. reported net income of $175,000 for 2019 and $210,000 for 2020. Early in 2020, McLelland discovers that the December 31, 2019 ending inventory was overstated by $20,000. For simplicity, ignore taxes. Required: 1. What is the correct net income for 2019? For 2020? 2. Assuming the error was not corrected, what is the effect on the balance sheet at December 31, 2019? At December 31, 2020?arrow_forward( Appendix 6B) Refer to the information for Morgan Inc. above. If Morgan uses a periodic inventory system, what is the cost of ending inventory under LIFO at April 30? a. $32,800 b. $38,400 c. $63,600 d. $69,200arrow_forwardPROBLEM 15 Examination of the records of Hopper Company for the year ended December 31, 2021 revealed the following: • Inventory at January 1, 2021 was overstated by P71,000. • Inventory at December 31, 2021 was understated by P96,000. • During 2021, Hopper received a P60,000 cash advance from a customer for merchandise to be manufactured and shipped during 2022. The P60,000 was credited to sales revenue. • Profit (before adjustments) reported on the 2021 profit or loss was P658,000. Explain the right profit for 2021arrow_forward
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