90.2K

Verified Solution

Link Copied!

B. 12th Man sold and shipped a bulk order costing $2,100 to the Alaska A&M club on December 15, Y1. The sale price for these goods was $3,000. The terms of the sale were FOB destination. 12th Man accountants assumed the goods would arrive by December 31 and recorded the sale in Y1. However, because of extended shipping times to Alaska, the goods did not arrive until January 3, Y2.

Bullet B

Journal entries (correct & incorrect):

COGS formula:

	Year 1	Year 2
Beginning inventory
+ Purchases
- Ending inventory
COGS

	Assets Bullet B	Liabilities Bullet B	Equity Bullet B
Y1
Y2

C. 12th Man held $12,000 in inventory from CC Creations, another Aggie merchandiser, while CC moved warehouses. The goods were on hand at December 31, Y1 and were counted by staff accountants as part of 12th Man's inventory. CC retrieved the inventory in January of Y2.

Step 2: Write out correct and recorded journal entries for each bullet, assuming 12^th Man Co uses a perpetual inventory system. Use the COGS formula to help understand the impact on count errors. Then, summarize the impact of each bullet point on assets, liabilities, and equity.

Remember that count errors in a given year affect the value of ending inventory.

Bullet C

Journal Entries (correct & incorrect):

COGS formula:

	Year 1	Year 2
Beginning inventory
+ Purchases
- Ending inventory
COGS

	Assets Bullet C	Liabilities Bullet C	Equity Bullet C
Y1
Y2

Step 3: Summarize effects of all 3 errors into one chart.

	Assets	Liabilities	Equity
Y1
Y2

Answer & Explanation Solved by verified expert

See Answer