1. The following information will be used for all 5 of the following computational questions.
In reviewing the books of Elder Retailers Inc., the auditor discovered certain errors that had occurred during 2013 and 2014. No errors were corrected during 2013. The errors are summarized below:
(A)Beginning merchandise inventory (January 1, 2013) was understated by $8,640.
(B)Merchandise costing $2,400 was sold for $4,000 to R.D. Mince on December 29, 2013, but the sale was recorded in 2014. The merchandise was shipped F.O.B. shipping point and was not included in ending inventory. Elder uses a periodic inventory system.
(C)A two-year fire insurance policy was purchased on May 1, 2013, for $5,760. The entire amount was debited to Prepaid Insurance. No adjusting entry was made in 2013 or 2014.
What is the required entry to record the correction to Inventory for Circumstance A?
- $ 8,640 Debit
- $ 8,640 Credit
- $ 4,320 Debit
- - 0 - , The errors counter-balance and offset from one year to the next.
2. What is the required entry to record the correction to Sales for Circumstance B?
- $ 4,000 Debit
- $ 4,000 Credit
- $ 2,000 Debit
- - 0 - , The errors counter-balance and offset from one year to the next.
3. What is the required entry to record the correction to Insurance Expense for Circumstance C?
- $ 1,920 Debit
- $ 1,920 Credit
- $ 2,880 Debit
- $ 2,880 Credit
4. What is the required entry to record the correction to Retained Earnings for Circumstance C?
- $ 1,920 Debit
- $ 1,920 Credit
- $ 4,800 Debit
- $ 4,800 Credit
5. What is the required entry to record the correction to Prepaid Insurance for Circumstance C?
- $ 1,920 Debit
- $ 1,920 Credit
- $ 4,800 Debit
- $ 4,800 Credit