Question

PART A On December 31, 20X1, Katherine Company purchases merchandise with shipping terms FOB destination. The...

PART A

On December 31, 20X1, Katherine Company purchases merchandise with shipping terms FOB destination. The company’s accountant records the purchase on the day the order is placed. The merchandise is not included in the ending inventory. No additional journal entry is made when the merchandise arrives on January 5, 20X2.

Assume that Katherine Company discovers the error is discovered at the beginning of 20X3. What journal entry should be made to correct the 20X1 error?

Multiple Choice

  • No journal entry is necessary

  • Debit Retained Earnings, Credit Inventory

  • Debit Inventory, Credit Retained Earnings

  • Debit Inventory, Credit Cost of Goods Sold

PART B

The summary of significant accounting policies does not help explain

Multiple Choice

  • the method used for determining depreciation expense.

  • management’s assessment of the financial condition of the firm.

  • whether certain investments are accounted for using the equity method.

  • the cost flow assumptions for valuing inventory.

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On December 31, 20X1, Katherine Company purchases merchandise with shipping terms FOB destination. The company’s accountant records the purchase on the day the order is placed. The merchandise is not included in the ending inventory. No additional journal entry is made when the merchandise arrives on January 5, 20X2.
Assume that Katherine Company discovers the error is discovered at the beginning of 20X3. What journal entry should be made to correct the 20X1 error?
Debit Retained Earnings, Credit Inventory.
The summary of significant accounting policies does not help explain:
Management’s assessment of the financial condition of the firm.
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