Rosner Company's business year ends on December 31. Listed below are
purchase transactions which occurred during the last few days of 2004 or
during the first few days of 2005. The inventory, determined by
physical count, was taken after the close of business on December 31,
2004. The only adjusting entry recorded to date has been to enter the
December 31 physical inventory on the books based on the physical count.
Instructions
1. On the accompanying chart, indicate the effect of each of these
transactions on the ending inventory and on reported net income for
2004, by writing the words overstated, understated, or no effect in the
appropriate column. Both columns must be answered for each transaction.
An invoice for $8,000, terms f.o.b. shipping point, was received and
entered December 30. The invoice shows that the merchandise was shipped
December 29, and the receiving report indicates the merchandise was
received January 2. An invoice for $300, terms f.o.b. shipping point,
was received and entered December 30. The invoice shows that merchandise
was shipped December 29, and the receiving report shows the merchandise
was received December 31. An invoice for $3,000, terms f.o.b. shipping
point, was received and entered January 2. The invoice shows the
merchandise was shipped December 30, and the receiving report indicates
the merchandise was received December 31. An invoice for $500, terms
f.o.b. destination, was received and entered December 30. The receiving
report shows the merchandise was received January 2. An invoice for
$500, terms f.o.b. destination, was received and entered December 29.
The receiving report indicates that the merchandise was received
December 31. An invoice for $1,500, terms f.o.b. destination, was
received and entered January 2. The receiving report indicates the
merchandise was received December 31. Merchandise costing $12,000 and
with a selling price of $18,000 was on consignment to Maris Distributing
Company and was on that company's premises on December 31. No entry has
been made for the consignment.
2. Prepare all necessary correcting entries for 2004. 3. Indicate which
of the correcting entries must be reversed in 2005 by preparing the
necessary reversing entries.
Click here for the solution: Rosner Company's business year ends on December 31
