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What is the net adjustment to accounts payable

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Reference no: EM132737831

In your audit of the December 31, 2019 ?nancial statements of NEW NORMAL Co, you found the following inventory related transactions:

1. Goods costing P100,000 are on consignment with a customer. These goods were invoiced at normal pro?t margin which was at 40% based on cost and was recorded as 2019 sales. Being offsite on the count date which was on December 30, 2019, were not included in the physical count.

2. Goods costing P33,000 were delivered to the company on January 4, 2020. The invoice of these goods were received and recorded on January 10, 2020. The invoice showed the shipment was made on December 29, 2019, FOB shipping point.

3. Goods costing P40,000 were shipped FOB Shipping Point on December 31, 2019, and were received by the customer on January 2, 2020. Although sale was recorded in 2019, these goods were included in the 2019 inventory.

4. Goods costing P16,000 were shipped to a customer on December 30, 2019, FOB Destination. These goods were received by the customer on January 5, 2020 and were not included in the physical count. The sale was properly recorded in 2020.

5. Goods costing P22,000 shipped by a vendor under FOB Destination term were received on January 3, 2020. The related invoice however, were received on December 31, 2019, thus was recorded as purchase in 2019.

6. Goods costing P50,000 were received from a vendor under consignment term. These goods were included in the physical count. No purchase related to the inventory had been recorded yet.

7. The company recorded as 2019 sales a P112,000 invoice for goods delivered to a customer on December 31, 2019, FOB Destination. The goods were received by the customer on January 5, 2020. Having been delivered after the count date, the goods were included in the physical count.


Problem 1: What is the net adjustment to inventories as of December 31, 2019?

Problem 2: Assuming all purchases are on account, what is the net adjustment to accounts payable?

Problem 3: What is the effect of the errors to the 2014 net income?

Reference no: EM132737831

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