In the course of routine checking of all journal entries prior to preparing year-end reports, Ying Wang discovered several strange entries. She recalled that the president’s son Jun had come in to help out during an especially busy time and that he had recorded some journal entries. She was relieved that there were only a few of his entries, and even more relieved that he had included rather lengthy explanations. The entries Jun made were:

(This is for materials put into process. I don’t find the record that we paid for these, so I’m crediting Cash because I know we’ll have to pay for them sooner or later.)

(This is for bonuses paid to salespeople. I know they’re part of overhead, and I can’t find an account called “Non-Factory Overhead” or “Other Overhead” so I’m putting it in Manufacturing Overhead. I have the check stubs, so I know we paid these.)

(This is for the factory workers’ wages. I have a note that employer payroll taxes are HK$180,000. I still think that’s part of wages expense and that we’ll have to pay it all in cash sooner or later, so I credited Cash for the wages and the taxes.)

(This is for the glue used in the factory. I know we used this to make the products, even though we didn’t use very much on any one of the products. I got it out of inventory, so I credited an inventory account.)

Instructions

a. How should Jun have recorded each of the four events?

b. If the entry was not corrected, which financial statements (income statement or statement of financial position) would be affected? What balances would be overstated or understated?

Transcribed Image Text:

(1) Work in Process Inventory 250,000 Cash 250,000