Rita Company sold electronic household items. At 9.00 p.m. on Thurs Dec 30, 2021, Rita Co’s warehouse personnel accepted a delivery of some merchandise inventory that Rita had purchased on account. Unfortunately, Rita’s accounting office closed for weekend at 4.00 p.m. that day, so the purchase was not recorded.

Q3a. Show the effect on Rita’s income for 2021, and its statement of financial position as at Dec 31, 2021 if in addition to failing to record the purchase, the company also failed to count the delivery in the year’s ending inventory. [Show the effect using the letters ‘O’ for Overstated, ‘U’ for Understated, ‘NE’ for No Effect and ‘OK’ for OK]

Q3b. Show the effect on Rita’s income for 2021, and its statement of financial position as at Dec 31, 2021 assuming that although the purchase was not recorded, the delivery was included in the count of ending inventory.

Answer rating: 100% (QA)

a Journal entry for purchase is Purchase Accounts payable If purchases are ... View the full answer