o AT&T; 11:15 PM cms.psu.edu = Chapter 10 Homework Due November 11, 2015 at 11:5
ID: 2448737 • Letter: O
Question
o AT&T; 11:15 PM cms.psu.edu = Chapter 10 Homework Due November 11, 2015 at 11:55 pm Identification of Cutoff Issues You are engaged to audit the Ferrick Corporation for the year ended December 31, 2014. Only merchandise shipped by the Ferrick Corporation to customers up to and including December 30, 2014, has been eliminated from inventory. The inventory as determined by physical inventory count has been recorded on the books by the company's controller. No perpetual inventory records are maintained. All sales are made on an FOB-shipping point basis. You are to assume that all purchase invoices have been correctly recorded. The following lists of sales invoices are entered in the sales journal for the months of December 2014 and January 2015, respectively Required: You are to ensure that there is proper cutoff of sales and inventory. Select each transaction that is incorrect and will require an adjustment. A) Sales in the amount of $3,200 were invoiced on December 27 2014 and entered into the 2014 sales journal. The merchandise cost $2,300 and was shipped out on December 30, 2014 Sales in the amount of $2,300 were invoiced on December 31 2014 and entered into the 2014 sales journal. The merchandise cost $1,200 and was shipped out on December 22, 2014 ac) Sales in the amount of $900 were invoiced on December 29, 2014 and entered into the 2014 sales journal. The merchandise cost $500 and was shipped out on December 30, 2014 D) Sales in the amount of $5,600 were invoiced on December 31 2014 and entered into the 2014 sales journal. The merchandise cost $3,900 and was shipped out on January 2, 2015 E) Sales in the amount of $9,700 were invoiced on December 30 2014 and entered into the 2014 sales journal. The merchandise cost $6,100 and was shipped out to a consignee on December 30, 2014 Sales in the amount of $6,200 were invoiced on December 31 2014 and entered into the 2015 sales journal. The merchandise cost $4,300 and was shipped out on December 30, 2014 G) Sales in the amount of $3,700 were invoiced on January 2, 2015 and entered into the 2015 sales journal. The merchandise cost $1,900 and was shipped out on January 2, 2015 H) Sales in the amount of $7,600 were invoiced on January 3, 2015 and entered into the 2015 sales journal. The merchandise cost $5,800 and was shipped out on December 31, 2014 Purchase Discounts In the previous question, you identified cutoff errors with the revenueExplanation / Answer
The sales should be recorded in the period when they are made and corresponding to the fact when risk and rewards of ownership are transferred, So when , the goods are actually sent to consignee , we can record sales
A. Adjustment needed, since sales is recorded before goods are shipped
B.Correct
C.Adjustment needed, since sales is recorded before goods are shipped
D.Adjustment needed. Sales is recorded in 2014, whereas transfer was done in 2015. So the sales should be shifted to 2015 ledger
E.Correct.
F..Adjustment needed. The entry of sales should be done in 2014 books as sales and shiping took place in 2014 not 2015.
G.Correct
H.Adjustment needed.The entry of sales should be done in 2014 books as shipping took place in 2014 not 2015.
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