Year-end Inventory Cutoff.Abel Company's business year ends on December 31. Listed below are purchase transactions which occurred during the last few days of 2014 or during the first few days of 2015. The inventory, determined by physical count, was taken after the close of business on December 31, 2014. The only adjusting entry recorded to date has been to enter the December 31 physical inventory on the books and to remove the beginning inventory.
Instructions
(a) On the accompanying chart, indicate the effect of each of these transactions on the ending inventory and on reported net income for 2014, by writing the words overstated, understated, or no effect in the appropriate column. Both columns must be answered for each transaction.
(b) Prepare all necessary correcting entries for 2014.
(c) Indicate which of the correcting entries must be reversed in 2013 by preparing the necessary reversing entries.

Question

Quizplus · Accepted Answer

The Answer of Year-end Inventory Cutoff.Abel Company's business year ends on December 31. Listed below are purchase transactions which occurred during the last few days of 2014 or during the first few days of 2015. The inventory, determined by physical count, was taken after the close of business on December 31, 2014. The only adjusting entry recorded to date has been to enter the December 31 physical inventory on the books and to remove the beginning inventory.
Instructions
(a) On the accompanying chart, indicate the effect of each of these transactions on the ending inventory and on reported net income for 2014, by writing the words overstated, understated, or no effect in the appropriate column. Both columns must be answered for each transaction.
(b) Prepare all necessary correcting entries for 2014.
(c) Indicate which of the correcting entries must be reversed in 2013 by preparing the necessary reversing entries.

Year-End Inventory Cutoff