The following are independent errors made by a company that uses the periodic inventory system: a. Goods in transit, pur
Posted: Sun Jul 03, 2022 4:12 pm
The following are independent errors made by a company that usesthe periodic inventory system: a. Goods in transit, purchased oncredit and shipped FOB destination, $10,000, were included inpurchases but not in the physical count of ending inventory. b.Purchase of a machine for $2,000 was expensed. The machine has a4-year life, no residual value, and straightline depreciation isused. c. Wages payable of $2,000 were not accrued. d. Payment ofnext year’s rent, $4,000, was recorded as rent expense. e.Allowance for doubtful accounts of $5,000 was not recorded. Thecompany normally uses the aging method. f. Equipment with a bookvalue of $70,000 and a fair value of $100,000 was sold at thebeginning of the year. A 2-year, non-interest-bearing note for$129,960 was received and recorded at its face value, and a gain of$59,960 was recognized. No interest revenue was recorded and 14% isa fair rate of interest. Required: Prepare the correcting journalentries if the company discovers each error 2 years after it ismade and it has closed the books for the second year. Ignore incometaxes.
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