Canlan Inc.is a subsidiary of a Canadian publicly traded manufacturer of construction materials.The company uses the first-in,first-out (FIFO)cost flow assumption.
a.An invoice for $55,000 of material received and used in production arrived after the year-end.Neither the purchase nor the accounts payable was recorded until year two.However,the amount of raw materials in ending inventory was correct based on the inventory count.
b.One of Canlan's products became obsolete and worthless during Year 1,but the inventory writedown did not occur until Year 2.The cost of this inventory was $225,000.
c.In the Year 1 closing inventory count,employees improperly included 2,000 units of finished goods that had already been sold to customers.These units had a cost of $20,000 under FIFO.
Required:
For each of the above independent scenarios (a)through (c),indicate in the following table the effect of the accounting errors on the books of Canlan Inc.Specifically,identify the amount and direction of over- or understatement of inventory and income for Year 1 and Year 2.If an account requires no adjustment,indicate that the account is "correct."

Question

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The Answer of Canlan Inc.is a subsidiary of a Canadian publicly traded manufacturer of construction materials.The company uses the first-in,first-out (FIFO)cost flow assumption.
a.An invoice for $55,000 of material received and used in production arrived after the year-end.Neither the purchase nor the accounts payable was recorded until year two.However,the amount of raw materials in ending inventory was correct based on the inventory count.
b.One of Canlan's products became obsolete and worthless during Year 1,but the inventory writedown did not occur until Year 2.The cost of this inventory was $225,000.
c.In the Year 1 closing inventory count,employees improperly included 2,000 units of finished goods that had already been sold to customers.These units had a cost of $20,000 under FIFO.
Required:
For each of the above independent scenarios (a)through (c),indicate in the following table the effect of the accounting errors on the books of Canlan Inc.Specifically,identify the amount and direction of over- or understatement of inventory and income for Year 1 and Year 2.If an account requires no adjustment,indicate that the account is "correct."