The accountant for Steele Company reported the following accounting treatments for several purchase transactions (FOB shipping point) that took place near December 31, 2003, the company s year end:
|
Date Inventory Was Shipped |
Was the Purchase Recorded in the Books on or before |
Was the Inventory Counted and Included in Inventory Balance |
|
|
December 31, 2003? |
Amount |
December 31, 2003? |
|
|
2003:00:00 |
|||
|
41,999 |
Yes |
$1,100 |
Yes |
|
42,002 |
Yes |
800 |
No |
|
31 Dec |
No |
1,800 |
Yes |
|
2004 |
|||
|
January 1 |
No |
300 |
Yes |
|
January 1 |
Yes |
3,000 |
No |
|
January 1 |
No |
600 |
No |
1. If Steele Company s records reported purchases and ending inventory balances of $80,800 and $29,800, respectively, for 2003, what would the proper amounts in these accounts have been?
2. What would be the correct amount of cost of goods sold for 2003, if the beginning inventory balance on January 1, 2003, was $20,200?
3. By how much would cost of goods sold be over or understated if the corrections in question (1) were not made?