ACC/349 Analysis and Correction of Journal Entries: Impact on Financial Statements

An analysis of journal entries and their impact on financial statements, with a focus on corrections and adjustments.

Ryan Scott

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ACC/349Analysis and Correction of Journal Entries: Impact on FinancialStatementsTeamCACC/349BYP 2-2In the course of routine checking of all journal entries prior to preparing yearendreports, Sally Yount discovered several strangeentries. She recalled that the president’ssonKen had come in to help out during an especially busy time and that he hadrecorded somejournal entries. She was relieved that there were only a few of his entries,and even morerelieved that he had included rather lengthy explanations. The entries Kenmade were:1.Work in Process Inventory25,000Cash25,000(This is for materials put into process. I don’t find the record that we paid for these,so I’mcrediting Cash, because I know we’ll have topay for them sooner or later.)2.Manufacturing Overhead12,000Cash12,000(This is for bonuses paid to salespeople. I know they’re part of overhead, and I can’tfind anaccount called “Non-factory Overhead” or “OtherOverhead” so I’m putting itinManufacturing Overhead. I have the check stubs, so I know we paid these.)3.Wages Expense120,000Cash120,000(This is for the factory workers’ wages. I have a note that payroll taxes are $12,000. Istillthink that’s part of wages expense, and that we’ll have to pay it all in cash sooner orlater, so Icredited Cash for the wages and the taxes.)4.Work in Process Inventory3,000Raw Materials Inventory3,000(This is for the glue used in the factory. I know we used this to make the products,eventhough we didn’t use very much on any one of the products. I got it out of inventory,so Icredited an inventory account.)Instructions(a)How should Ken have recorded each of the fourevents?Answer:Ken should have recorded,each of the four events,as follows:1.

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University

University of Phoenix

Course

ACC 349

Subject

Accounting

ACC/349 Analysis and Correction of Journal Entries: Impact on Financial Statements

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