ABC, Inc. uses a periodic inventory system and reported $300,000 of inventory as of December 31,...

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ABC, Inc. uses a periodic inventory system and reported $300,000 of inventory as of December 31, 2014. Upon reviewing the company's records, the auditor noted the following items which may have been recorded incorrectly regarding their inventory. a) Goods purchased costing $25,000 were shipped f.o.b. destination by a supplier on December 26 and were received on January 2. ABC received and recorded the invoice on December 29. The goods were not on hand for the physical count and therefore not included. b) On December 28, 2014, merchandise costing $29,000 was sold to XYZ Inc. XYZ had asked ABC to not ship the goods as they would come and pick them up. Because the merchandise was still on the loading dock waiting for pick up at year-end, the merchandise was included in the inventory count. ABC has a mark-up on cost of 60%. No sale was recorded as of December 31st c) ABC had goods out on consignment with a selling price of $20,000. Mark up on cost for this type of merchandise is 25%. No sales invoice was recorded; the goods were not included in the physical count because they were not in the warehouse. Required: 1. Determine the effect of these errors on ABC's financial statements as of December 31, 2014. Use O for overstated, U for understated, or NE for No Effect. If there is an effect, state the dollar amount. State the over/understatement first, followed by the dollar amount. Do not space between the O/U/NE and the dollar amount. For example, if Assets are understated by $7,000, record your answer at U7000. Assets Liabilities $ Equity ABC, Inc. uses a periodic inventory system and reported $300,000 of inventory as of December 31, 2014. Upon reviewing the company's records, the auditor noted the following items which may have been recorded incorrectly regarding their inventory. a) Goods purchased costing $25,000 were shipped f.o.b. destination by a supplier on December 26 and were received on January 2. ABC received and recorded the invoice on December 29. The goods were not on hand for the physical count and therefore not included. b) On December 28, 2014, merchandise costing $29,000 was sold to XYZ Inc. XYZ had asked ABC to not ship the goods as they would come and pick them up. Because the merchandise was still on the loading dock waiting for pick up at year-end, the merchandise was included in the inventory count. ABC has a mark-up on cost of 60%. No sale was recorded as of December 31st c) ABC had goods out on consignment with a selling price of $20,000. Mark up on cost for this type of merchandise is 25%. No sales invoice was recorded; the goods were not included in the physical count because they were not in the warehouse. Required: 1. Determine the effect of these errors on ABC's financial statements as of December 31, 2014. Use O for overstated, U for understated, or NE for No Effect. If there is an effect, state the dollar amount. State the over/understatement first, followed by the dollar amount. Do not space between the O/U/NE and the dollar amount. For example, if Assets are understated by $7,000, record your answer at U7000. Assets Liabilities $ Equity

Answer rating: 100% (QA)

Assets a Understated 25000 b No Effect c No Effect Liabilities No Effect Equity No Effect a The inv... View the full answer