The Ogale Equipment Corporation maintains a general ledger account for each class of inventory, debiting the individual accounts for increases during the period and crediting them for decreases. The transactions that follow are for the Raw Materials inventory account, which is debited for materials purchased and credited for materials requisitioned for use.
1. An invoice for $8,100, terms f.o.b. destination, was received and entered on January 2, 2018. The receiving report shows that the materials were received on December 28, 2017.
2. Materials costing $7,300 were returned to the supplier on December 29, 2017, on f.o.b. shipping point terms. The returns were entered into Ogale's general ledger on December 28, even though the returned items did not arrive at the vendor's office until January 6, 2018.
3. Materials costing $28,000, shipped f.o.b. destination, were not entered by December 31, 2017, because they were in a railroad car on the company's siding on that date and had not been unloaded.
4. An invoice for $7,500, terms f.o.b. shipping point, was received and entered on December 30, 2017. The receiving report shows that the materials were received on January 4, 2018, and the bill of lading shows that they were shipped on January 2, 2018. 5. Materials costing $19,800 were received on December 30, 2017. No entry was made for them as at that date, because they were ordered with a specified delivery date of no earlier than January 10, 2018.
6. Materials costing $20,000 were received on December 29, 2017. The supplier's warehouse was full and the supplier asked Ogale to hold these items on its behalf and has also insured these items for the period that Ogale will be holding them. The purchase terms indicate that the supplier will purchase these items back from Ogale in early January 2018 at $20,000 plus storage fees.
7. Materials costing $5,500 were received on December 20, 2017, on consignment from P. Perry Company.
Instructions
(a) Prepare any correcting journal entries that are required at December 31, 2017, assuming that the books have not been closed. Also indicate which entries must be reversed after closing so that the next period's accounts will be correct.
(b) Are there any ethical concerns raised by these transactions? How should Ogale deal with this situation?