Problem - The following transactions occurred during year 2010
Year 2010
July 10 purchased 18 units at $15
July 12 purchased 21 units at $20
July 15 purchased 23 units at $25
August 21 sold 32 units
September 14 customer returned merchandise that was defective.
Blue Sky strategically use LIFO perpetual inventory systems to record the sales of merchandise
the warehouse and shipping department followed the company strategy BUT the accounting department erroneously recorded the sales of merchandise using the FIFO perpetual inventory systems
Blue Sky uses a 60% markup on cost
Merchandise returned was received by the warehouse but was never recorded in the books. The merchandise was sold for $192
Federal tax rate for the year is equal to 30%
You discovered the errors in January 7, 2011 ( after books has been closed )
Requirements:
1) Determine the amount on each account that is understated or overstated at December 31, 2010?
2) On January 7, 2011 write the adjusting journal entry to correct the errors (books are closed).