Listed below are four common accounting errors. Using the format shown, indicate the effect, if any, of each of the errors on the company’s financial statements for the items shown. Assume the company uses the perpetual inventory system and that the ending inventory balance will be adjusted to the physical count at year-end.
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2015 Statements |
2016 Statements |
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Errors |
Opening invent. |
Ending invent. |
2015 Total assets |
2015 Net income |
Opening invent. |
Ending invent. |
2016 Total assets |
2016 Net income |
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1. Goods purchased in 2015 were included in December 31 inventory, but the transaction was not recorded until early 2016. |
-0- |
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2. Goods purchased in 2015 were included in December 31, 2015 inventory, and the transaction was recorded in 2015. |
-0- |
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3. Goods were purchased in 2015 and the transaction recorded in that year; however, the goods were not included in the December 31 inventory as they should have been. |
-0- |
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4. Goods purchased in 2015 were excluded from December 31 inventory, and the transaction was recorded early in 2016. |
-0- |
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Required: Use a + (plus sign) to denote that an item is too high as a result of the error, a – (minus sign) to denote that it is too low, and a -0- (zero) to indicate no effect. The answer for the 2015 opening inventory is shown.
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