Question: Mulligan Corporation purchases inventory on account with terms FOB shipping point. The goods are shipped on December 30, 2012, but do not reach the company until January 5, 2013. Mulligan correctly records accounts payable associated with the purchase but does not include this inventory in its 2012 ending inventory count.
Required: 1. If an error has been made, explain why.
2. If an error has been made, indicate whether there is an understatement (U), overstatement (O), or no effect (N) on the reported amount of each financial statement element in the current year and following year. Ignore any tax effects.
