Company A sells floral centerpieces, but they aren’t very good at accounting. They have a year-end of December 31st. In 2019, they recorded their regular transactions, but then realized the following:

1. They were counting inventory at 12/31/18 and the inventory clerk forgot to include in inventory $40,000 of flowers that were in transit to a customer (shipped FOB destination a few days before). Analyze the error assuming that it is not discovered at 12/31/18. Use the standard grid, but also include a line for retained earnings.

2. They are impressed, but are also bummed out. It appears that in March 2019, their clerk forgot to record the freight in of 10,000 for items that were purchased in March. The error was not discovered until they paid the freight bill in 2020. Analyze using the standard grid, but analyze retained earnings as well.

3. If Company A just lets both errors play out without correcting them, what is the amount of the error they would have in their 2019 cost of goods sold account on their income statement?

4. If Company A discovered “error part a” while the books were open at 12/31/2018, what journal entry should they have booked?

Answer rating: 100% (QA)

1 The error in the income statement of 2019 would be ... View the full answer