During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated...
During 2021, WMC Corporation discovered that its ending
inventories reported in its financial statements were misstated by
the following material amounts:
| 2019 | understated by | $ | 124,000 | |
| 2020 | overstated by | 154,000 | ||
WMC uses a periodic inventory system and the FIFO cost
method.
Required:
1. Determine the effect of these errors on
retained earnings at January 1, 2021, before any adjustments.
(Ignore income taxes.)
2. Prepare a journal entry to correct the
errors.
Homework Answers
Answer 1: Overstated
Ending Inventory understated by $124,000 in 2019 will have no effect on Retained earnings at Jan 1, 2021, because with ending inventory being understated by $124,000 in 2019, beginning inventory on will also be understated by same amount i.e. $124,000, and accounts for 2020 also has been closed, therefore cumulatively it will not have any impact on retained earnings at Jan 1, 2021
Ending inventory overstated by $154,000 in 2020 means that net income for 2020 has been more by $154,000 which means retained earnings is more by $154,000
Answer 2:
Journal entry to correct the error.
| Account Titles | Debit | Credit |
| Retained Earnings | $154,000 | |
| Inventory | $154,000 | |
| (To record the correction of inventory error) |
Add Answer to:
During 2021, WMC Corporation discovered that its ending
inventories reported in its financial statements were misstated...
During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated...
During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts: understated by 2019 $138,000 168,000 overstated by 2020 WMC uses a periodic inventory system and the FIFO cost method. Required: 1. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. (lgnore income taxes) 2. Prepare a journal entry to correct the errors. Complete this question by entering your answers in the tabs...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE THANK YOU! During 2021, WMC Corporation...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE
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Thank you! :)
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THANK YOU!
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Please provide the journal entry as well.
Thank you! :)
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 $8.000. b. Inventory at December 31, 2020, was overstated by $11,000 c. On December 31, 2020, inventory was purchased for $5.000. The company did not record the purchase until...
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