E5-3 Sept.

6 Merchanise Inventory 1600 Cash 1600 (Purchase calculators for cash from (Devito Co) 9 Merchanise Inventory 80 Cash 80 (To record payment for freight on calculators) 10 Accounts Payable 42 Merchanise Inventory 42 (To record return of calculator from Devito Co.) 12 Accounts Receivable 806 Sales 806 (To record the sale to Mega Book Store) 12 Cost of Goods sold 546 Merchandise Inventory 546 (To record cost of merchandise sold to Mega Book Store) 14 Merchanise Inventory 31 Cost of Goods Sold 31 (To record cost of goods returned) 20 Accounts Receivable 930 Sales 930 (To record sale of calculators to Barbaras Shop) 20 Cost of Goods sold 630 Merchanise Inventory 630 (To record the cost of merchandise sold to Barbara's Shop) E6-12a 10,000 26,000 36,000 10,400 25,600

E5-16 April 5.

15

May 4.

E6-7a FIFO Beginning Purchase Cost of good available for sale Ending inventory Cost of Goods sold LIFO Beginning Purchase cost of goods available for sale Ending Inventory Cost of Goods Sold Average Cost 36,000 / 300 = 120.00 80 X 120.00 = 9600.00 36,000 - 9600 = 26,400 Cost of Goods Sold E6-7 b

Stanley Watch Company Condensed Income Statement

10,000 26,000 36,000 18,000 18,000

Sales Beginning Inventory Cost of Goods purchased Cost of Goods available for sale Ending Inventory Cost of Goods Sold Gross Profit Net Income

E6-12b

LIFO E6-7C LIFO E6-7D LIFO

The gross profit in 2008 is understated and t E6-12 c To the President of Stanley Company,

As the accountant in the financial departeme inventory for 2008. the department stated t balance in this department. As a result of th for 2009 is over 5000 dollars. The error has was offset it did not make any changes to th depatment wanted to inform you of the issu with corrections made. Sorry for the inconvi

Purchases 20,000 Accounts Payable 20,000 (To record goods purchased on account) Freight-Out 900 Cash 900 (To record payment of Freight-Out) Purchases 26,000 Accounts Payable 26,000 (To record goods purchased on account) Accounts Payable 2800 Purchased return and allowances 2800 (To record return of goods purchases) Cash 19600 Sales Discounts 400 Accounts Receivable 20,000 (To record collection of payment within 2/10, n/30 Cash 20,000 Accounts Receivable 20,000 (To record payment on account.

Stanley Watch Company Condensed Income Statement 2008 Incorrect 210,000 32,000 173,000 205,000 5,000 200,000 10,000 10,000 32,000 173,000 205,000 44,000 161,000 49,000 49,000 Correct 210,000 5,000 202,000 207,000 52,000 155,000 95,000 95,000 Incorrect 250,000 44,000 202,000 246,000 52,000 2009 Correct

ods purchased ods available for sale

39,000 (net income understated)

39,000 (net income overstated)

profit in 2008 is understated and the gross profit in 2009 is overstated because the error occurred in 2008 so when the company transferr

sident of Stanley Company,

ountant in the financial departement in 2008 the financial department made an error when reporting the ending or 2008. the department stated the company had an ending inventory of 44,000 and it should have shown an 49,000 this department. As a result of this error the income statement for 2008 is short 5000 and the income statement over 5000 dollars. The error has been fixed and we apologize for the overlook in our department because the error it did not make any changes to the income statement so there is no a major problem for the company. The financial wanted to inform you of the issue and let you know it has been resolved and send you an up-to-date statement ctions made. Sorry for the inconvience .

250,000

194,000 56,000 56,000

(net income overstated)

8 so when the company transferred the balance in 2009 it was already incorrect so that made the 2009 balance off in the beginning of th

wn an 49,000

use the error The financial

balance off in the beginning of the year.