Question

ter 9 GRADED O In 2018, the controller of Sytec Corporation discovered that $60,000 of inventory purchases were incorrectly charged to advertising expense in 2017. In addition, the 2017 year-end Inventory count failed to include $39,000 of company merchandise held on consignment by Erin Brothers. Sytec uses a periodic inventory system. Other than the omission of the merchandise on consignment, the year-end inventory count was correct. The amounts of the errors are deemed to be material no @ Do Required: 1. Determine the effect of the errors on retained earnings at 2. Prepare a journal entry to correct the errors. Complete this question by entering your answ Required. Required 2 Determine the effect of the errors on retain income taxes.) Retained earnings would

Answer 1

solution 60000 Beginning Inventory Add: Net purchases Less: Ending Inventory cost of goods sold understated by 39000 21000 21000 Revenues: :: cost of goods sold Less: Other expenses Net Income under stated by 60000 39000 Total retained earnings understated 39000 by

Date Account title Debet Gedet 39000 Inventory Retained earnings 39000 [ To record understatement of Inventory