ADS ships inventory between plants as part of managing inventory levels. ADS's policy was to capitalize in inventory freight costs associated with intra-company transfers of inventory. In fiscal year 2015, ADS booked two unsupported adjustments to capitalized freight that resulted in overstating the Company's earnings. In September 2014, Sturgeon directed a journal entry that increased the capitalized freight account, and correspondingly decreased COGS, by $500,000. This accounting entry lacked adequate support. In addition, at year-end, accounting personnel booked a journal entry that increased the capital freight account, and correspondingly decreased COGS, by approximately $296,000. This adjustment also lacked 5 adequate support. These two accounting adjustments overstated the Company's 2015 income before taxes by approximately $796,000. 

What would the journal entries look like?

Answer rating: 100% (QA)

The journal entries for the unsupported adjustments to capitalized fr... View the full answer