Question

Error Analysis

1. All sales and purchases were made on credit. In the space provided in the table, indicate the effect of each error on the elements presented. Use the following symbols to answer this part:

↑ for when overestimated

↓ for when underestimated

NE for when there is no effect

Event	Accounts Receivable	Inventory	Accounts Payable	Sales	Cost of goods sold
Purchased goods, which are in transit, were noted as a purchase, but were excluded from the final inventory. The term of the purchase established that it was FOB destination.
Goods that the company received on consignment were recorded as purchased and included in the inventory count.
Goods sold and in transit under the terms of FOB point of departure (shipping point) were not noted as a sale and were included in the final inventory

2. Inventory cost flow methods

Jordan Companies was established on December 1, 2007. The following information is available from Jordan's books for Product K.

Description	Units	Price by unit
Initial inventory	1,600	$18.00
Purchases: January 5, 2008	2,600	$20.00
January 25, 2008	2,400	$21.00
February 16, 2008	1,000	$22.00
March 15, 2008	1,800	$23.00

Additional Information: On March 31, 2008 a physical inventory was made, the company only had 2000 units.

1. Determine the value of the final inventory if Jordan uses FIFO (Periodic System)

$ _____________

2. Determine the cost of goods sold if Jordan uses LIFO (Periodic System)

$ ______________

3. Determine the value of the final inventory if the company uses Weighted Average (Periodic System)

$ _______________

4. Determine the value of the final inventory if on January 30 the company sold 5,800 units and on March 20 it sold another 1,600 units and the company uses FIFO (Perpetual System).

$ ______________

5. Determine the value of the final inventory using the information in # 4, only now the company uses LIFO (Perpetual System).

$ _____________

Answer 1

Event	Accounts Receivable	Inventory	Accounts Payable	Sales	Cost of goods sold
Purchased goods, which are in transit, were noted as a purchase, but were excluded from the final inventory. The term of the purchase established that it was FOB destination.	NE	NE	↑	NE	NE
Goods that the company received on consignment were recorded as purchased and included in the inventory count.	NE	↑	↑	NE	NE
Goods sold and in transit under the terms of FOB point of departure (shipping point) were not noted as a sale and were included in the final inventory	↓	↑	NE	↓	↓