Items 2, 3, 5, 8, 10, 13

The following items w

1. Cost of goods sold
4. Not reported in the
6. Cost of goods sold
7. Cost of goods sold
9. Interest expense in
11. Advertising expen
12. Office supplies in
15. Not reported in th
18. Short-term investm
Items 2, 3, 5, 8, 10, 13, 14, 16, and 17 would be reported as inventory in the financial statements.

The following items would not be reported as inventory:

1. Cost of goods sold in the income statement.
4. Not reported in the financial statements.
6. Cost of goods sold in the income statement.
7. Cost of goods sold in the income statement.
9. Interest expense in the income statement.
11. Advertising expense in the income statement
12. Office supplies in the current assets section of the balance sheet.
15. Not reported in the financial statements.
18. Short-term investments in the current asset section of the balance sheet.
a. 10-May Purchases 19600
Account Payable 19600

11-May Purchases 14850

Account Payable 14850

19-May Account Payable 19600

Cash 19600

24-May Purchases 11270

Account Payable 11270

b. 31-May Purchase Discount Lost 150

Account Payable 150
a. 1-Feb

4-Feb

13-Feb

b. 1-Feb

4-Feb

13-Feb

c. Purchase price (list)

Less : Trade discount)
Price on which cash d
Less : Cash discount
Net price
 Inventory 10800
Account Payable 10800

Account Payable 2700

Inventory 2700

Account Payable 8100

Inventory 243
Cash 7857

Purchases 10800
Account Payable 10800

Account Payable 2700

Purchases Return and Allowance 2700

Account Payable 8100

Purchase Discount 243
Cash 7857

Purchase price (list) 12000

Less : Trade discount) 1200
Price on which cash discount based 10800
Less : Cash discount 324
Net price 10476
a. 4-Jan Account Receivable
Sales

11-Jan Purchases
Account Payable

13-Jan Account Receivable

Sales

20-Jan Purchases
Account Payable

27-Jan Account Receivable

Sales

31-Jan Inventory
Cost of Goods Sold
Purchases
Inventory

b. Sales
Cost of Goods Sold
Gross profit

c. 4-Jan Account Receivable

Sales

Cost of Goods Sold

Inventory

11-Jan Inventory
Account Payable

13-Jan Account Receivable

Sales

Cost of Goods Sold

Inventory

20-Jan Inventory
Account Payable

27-Jan Account Receivable

 Sales

Cost of Goods Sold

Inventory

d. Sales
Cost of Goods Sold
Gross profit
Account Receivable 640
Sales 640

Purchases 975
Account Payable 975

Account Receivable 1050

Sales 1050

Purchases 1120
Account Payable 1120

Account Receivable 900

Sales 900

Inventory 770
Cost of Goods Sold 1925
Purchases 2095
Inventory 600

2590
1925
665

Account Receivable 640

Sales 640

Cost of Goods Sold 480

Inventory 480

Inventory 975
Account Payable 975

Account Receivable 1050

Sales 1050

Cost of Goods Sold 770

Inventory 770

Inventory 1120
Account Payable 1120

Account Receivable 900

 Sales 900

Cost of Goods Sold 675

Inventory 675

2590
1925
665
a. Working capital
Current ratio
Retained earnings
Net income

b. Working capital
Current ratio
Retained earnings
Net income

c. Working capital
Current ratio
Retained earnings
Net income
Current Year Subsequent Year
No effect No effect
Overstated No effect
No effect No effect
No effect No effect

Overstated No effect
Overstated No effect
Overstated No effect
Overstated Understated

Overstated No effect
Overstated No effect
Overstated No effect
Overstated Understated