During the current accounting period, Page Company makes the following errors.

The company uses a perpetual inventory system.

Required;

Indicate the effect of each error on the net income, total assets, total liabilities, and total shareholders? equity at the end of the accounting period by using the following code: O = overstated, U = understated, N = no effect. Disregard income taxes.

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Error Example: Failed to record a cash sale: 1. The purchase of equipment for cash is recorded as a debit to Equipment and a credit to Accounts Payable. 2. Failed to record the purchase of inventory on credit. 3. Cash received from a customer in payment of its account is recorded as if the receipt were for a current period sale. 4. Failed to record a credit sale. 5. At the end of the year, the receipt of money from a 60-day, 12% bank loan is recorded as a debit to Cash and a credit to Sales Revenue. 6. Failed to record depreciation at the end of the current period. Net Income Total Assets U Total Liabilities N Total Shareholders' Equity U Error Example: Failed to record a cash sale: 1. The purchase of equipment for cash is recorded as a debit to Equipment and a credit to Accounts Payable. 2. Failed to record the purchase of inventory on credit. 3. Cash received from a customer in payment of its account is recorded as if the receipt were for a current period sale. 4. Failed to record a credit sale. 5. At the end of the year, the receipt of money from a 60-day, 12% bank loan is recorded as a debit to Cash and a credit to Sales Revenue. 6. Failed to record depreciation at the end of the current period. Net Income Total Assets U Total Liabilities N Total Shareholders' Equity U

Answer rating: 100% (QA)

1 Prepare the journal entry in the case of purchase of equipment for cash When equipment is purchased for cash equipment is to be debited and cash is ... View the full answer