One client had indicated that they were interested in purchasing $45,500 worth o

Question

• One client had indicated that they were interested in purchasing $45,500 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase.
• The bookkeeper already corrected the sales account. However, the bookkeeper may have made a mistake when computing cost of goods sold. She included total production costs for 2012 and did not adjust ending inventory for the $45,500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count.
• The company made a secondary offering of stock and raised an additional $225,000.
• The company had already paid $22,000 in dividends before deciding on the offering.
• The company now has cash to invest in a piece of raw land on which to build in the future. The investment takes place before year end. The cost of the land is $400,000, the downpayment is $20,000 and a note to the bank covers the rest.

Please tell me which Account on the Income Statement or Balance Sheet is affected by each of the above events.
The choices of accounts are: Accounts payable Accounts receivable Cash Common stock Depreciation Cost of goods sold Equipment Insurance Inventory Long-term Debt Marketing Paid-in capital property taxes rent retained earnings revenues salaries utilities
Please tell me which Account on the Income Statement or Balance Sheet is affected by each of the above events.
The choices of accounts are: Accounts payable Accounts receivable Cash Common stock Depreciation Cost of goods sold Equipment Insurance Inventory Long-term Debt Marketing Paid-in capital property taxes rent retained earnings revenues salaries utilities

Explanation / Answer

The following corrections need to be made: 1. Since there results no actual sale, hence that should be removed from sales account, but that has already been corrected. The only mistake is in the cost of goods sold account which should be now reduced by 45500 because those goods are not actually sold. 2. Since the closing inventory was by using a physical cost, hence this needs no adjustment. Please consider the time devoted to make this reply by rating this as 5 star.

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