During 2013, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by

Question:

During 2013, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts:

2011 understated by ........$120,000

2012 overstated by ........ 150,000

WMC uses a periodic inventory system and the FIFO cost method.


Required:

1. Determine the effect of these errors on retained earnings at January 1, 2013, before any adjustments. Explain your answer. (Ignore income taxes.)

2. Prepare a journal entry to correct the errors.

3. What other step(s) would be taken in connection with the correction of the errors?


Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For  book-img-for-question

Intermediate accounting

ISBN: 978-0077647094

7th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson

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