While Preparing the First Quarter 20X7 Financial Statements, the Accounting

Essay

While preparing the first quarter 20X7 financial statements, the accounting staff of Melanson Flooring Inc. discovered an error in the December 31, 20X6 financial statements. Inventory costing $225,000 had been in transit and was not received until January 5 20X7. The accounts payable had recorded the purchase as an account payable on December 28 20X6. The inventory had been shipped on December 27 20X6 with the terms FOB shipper. Melanson uses a periodic inventory system.
A What impact did the error have on Melanson's 20X6 financial statements?
B When the error is discovered in the first quarter of 20X7, what correcting entry should Melanson 's accountants make?