Answer:
Tog Company
a. The correct December 31, 2021 balance of Inventory is
= $592,500.
b. The error increased the cost of goods sold, thereby reducing the net income and the retained earnings.
c. Journal Entries to correct errors:
Debit 2021 Inventory $67,000
Credit 2022 Inventory $67,000
To correct the error.
December 31, 2021
Debit Purchase $97,000
Credit Accounts Payable $97,000
To record the purchase of merchandise, shipped FOB shipping point on December 28, 2021.
Explanation:
a) Data and Calculations:
Physical count Inventory = $467,000
FOB shipping point 2021 = 28,500
December 28 FOB shipping point = 97,000
December 31, 2021 balance = $592,500
The error would increase the cost of goods sold, thereby reducing the net income and the retained earnings.
Journal Entries to correct errors:
December 31, 2021
a. 2021 Inventory $67,000 2022 Inventory $67,000. The records should be for 2021 and not 2022.
b. This only affects the physical count and not the records.
c. Purchase $97,000 Accounts Payable $97,000. Both the physical count and the records were omitted.
