Inventory Errors (Points: 1) Use the following information to answer the NEXT (4) questions: ABC, Inc. uses a periodic inventory system and reported $300,000 of inventory as of December 31, 2012. Upon reviewing the company's records, the auditor noted the following items which may have been recorded incorrectly regarding their inventory.
a) Goods purchased costing $25,000 were shipped f.o.b. destination by a supplier on December 26 and were received on January 2. ABC received and recorded the invoice on December 29. The goods were not on hand for the physical count and therefore not included.
b) Included in the physical count were goods shipped to a customer FOB Shipping point on December 31. The goods had a cost of $12,000. ABC recorded the sale on December 31 at 50% mark up on cost. At the close of the business day on December 31, the shipment was still on ABC's loading dock waiting to be picked up by the common carrier.
c) ABC had goods out on consignment with a selling price of $20,000. Mark up on cost for this type of merchandise is 25%. No sales invoice was recorded; the goods were not included in the physical count because they were not in the warehouse.
Required:
1. Determine the effect of these errors on ABC's financial statements as of December 31, 2012. Use O for overstated, U for understated, or NE for No Effect. If there is an effect, state the dollar amount. State the over/understatement first, followed by the dollar amount. Assets $_______ =Liabilities$__________+Equity$_________ 1. Determine the effect on Assets as of December 31, 2012:
2. Using the information presented above, determine the effect on Liabilities as of December 31, 2012: 3.Using the information presented in #1 above, determine the effect on Total Equity as of December 31, 2012: