Question

In 2018, the internal auditors of Development Technologies, Inc., discovered that a $5.9 million purchase of merchandise in 2018 was recorded in 2017 instead. The physical inventory count at the end of 2017 was correct. Assume the company uses a periodic inventory system.Required:Prepare the journal entry needed in 2018 to correct the error. (Ignore income taxes.) (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)No Event General Journal Debit Credit1 1 Miscellaneous expense 5.9 1 No journal entry required5.9Please note the journal entries are not retained earnings or inventory, the system says it is wrong. Thanks.

Answer 1

Answer:

Explanation:

The journal entry is shown below:

Purchase A/c Dr $5.9 million

     To Retained earning A/c $5.9 million

(Being the error is corrected and it credited to the retained earning account)

For correction of an error, we debited the purchase account and credited the retained earning account for $5.9 million so that the correct posting can be done.