Hart Nance and Jason Symington operate gift boutiques in shopping malls. The par

Question

Hart Nance and Jason Symington operate gift boutiques in shopping malls. The partners split profits and losses equally, and each takes an annual withdrawal of $80,000. To even out the workload, Nance travels around the country inspecting their properties. Symington manages the business and serves as the accountant. From time to time, they use small amounts of store merchandise for personal use. In preparing for his daughter’s wedding, Symington took inventory that cost $10,000. He recorded the transaction as follows: debited Cost of Goods Sold for $10,000 and credited Merchandise Inventory for $10,000 Requirements 1. How should Symington have recorded this transaction? 2. Discuss the ethical aspects of Symington’s action.

Explanation / Answer

1 ) In this transaction, personal use item is recorded as COS for the preparation of wedding. This is a transaction for purpose but indicated as goods were sold $10,000

correction entry

DRAWINGS A/C DEBIT 10000

TO INVENTORY MERCHENDISE A /C 10000

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