Please prepare the jornal entries as well as describe the effect on income and a
ID: 2534013 • Letter: P
Question
Please prepare the jornal entries as well as describe the effect on income and amounts effected. Also please write a memo including what went wrong and how it affected income. 5A,B. While testing items in the December sales journal, you noted that shipping documents indicated that $60,000 in sales (cost of $40,000) were not actually shipped until January of the new year. The related inventory was counted and listed on the year-end inventory summary 5A. Record the adjustment to correct sales, if necessary. 5B. Record the adjustment to correct inventory, if necessary. Hints: If this is not a sale at December 31, 2017, who owns the inventory? If we own the inventory and should have counted it, was it counted? If we own it and counted it, don't adjust inventory. If we own it and didn't count it, then adjust inventory. Page 3 6A,B. As part of performing the year-end sales cut-off procedures you identified a large sales return that was recorded early in the new year.Explanation / Answer
5
5a. As the sale is properly recorded in the books there is no adjustment entry required.
5b. The closing stock in this case is over valued.
Hence the rectified entry would be
Profit and loss a/c debit 40000
To inventory . 40000
6
6a . As the sales return is already recorded there us no adjustment entry required. But this is not a real sale.
6b. The inventory need to be recorded in the account
Inventory a/c dr. 240,000
To p&l 240,000
7.
7a. Adjustment entry to record sales return
Sales return a/c dr. 45,000
To Account receivable. 45,000
7b. To record correct inventory
Profit and loss a/c dr 15,000
To Inventory 15,000
As the value us inventory is brought down by $15000
8.
The sale was not recorded in the account
Adjustment entry
Account receiveable 30,000
To sale. 30000
9.
9a.As it was sale on agreement basis it cannot be termed as a real sale and hence the journal will be.
Account receiveable. 270,000
To Sale on Agreement 270000
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