Calculating Effect of Inventory Errors: For each of the following scenarios, determine the effect of...
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Accounting
Calculating Effect of Inventory Errors: For each of the following scenarios, determine the effect of the error on income in the current period and in the subsequent period. To answer these questions, rely on the inventory equation: Beginning inventory 1 Purchases 2 Cost of goods sold 5 Ending inventory a. Porter Company received a shipment of merchandise costing $32,000 near the end of the fiscal year. The shipment was mistakenly recorded at a cost of $23,000. b. Chiu, Inc., purchased merchandise costing $16,000. When the shipment was received, it was determined that the merchandise was damaged in shipment. The goods were returned to the supplier, but the accounting department was not notied and the invoice was paid. c. After taking a physical count of its inventory, Murray Corporation determined that it had shrink of $12,500, and the books were adjusted accordingly. However, inventory costing $5,000 was never counted.
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