Question Details

Goods held on consignment were included in inventory 



Pr. 1—Inventory cut-off.
Vogts Company sells TVs. The perpetual inventory was stated as $28,500 on the books at December 31, 2010. At the close of the year, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements was not made. Some events that occurred are as follows.

1.	TVs shipped to a customer January 2, 2011, costing $5,000 were included in inventory at December 31, 2010.  The sale was recorded in 2011.
2.	TVs costing $12,000 received December 30, 2010, were recorded as received on January 2, 2011.
3.	TVs received during 2010 costing $4,600 were recorded twice in the inventory account.
4.	TVs shipped to a customer December 28, 2010, f.o.b. shipping point, which cost $10,000, were not received by the customer until January, 2011.  The TVs were included in the ending inventory.
5.	TVs on hand that cost $6,100 were never recorded on the books.

Instructions
Compute the correct inventory at December 31, 2010.
Pr. 2—Analysis of errors.
(All sales and purchases are on credit.)  
Indicate in each of the spaces provided the effect of the described errors on the various elements of a company's financial statements. Use the following codes: O = amount is overstated;  U = amount is understated; NE = no effect. Assume a periodic inventory system.

		Accounts		Accounts		Cost of
		Receivable	Inventory	Payable	Sales	Goods Sold
EXAMPLE: 	Excluded goods in rented	
	warehouse from inventory 	NE	U	NE	NE	O
	count.
	
1.	Goods in transit shipped "f.o.b. destination" by supplier were recorded as a purchase but were excluded from ending inventory.
	
2.	Goods held on consignment were included in inventory count and recorded as a purchase.
	
3.	Goods in transit shipped "f.o.b. shipping point" were not recorded as a sale and were included in ending inventory.
	
4.	Goods were shipped and appro-priately excluded from ending inventory but sale was not recorded.
	


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