What are the types of prior year adjustments?
How to report on current year financial statements?
Are there any financial guide lines or GAAP rules?
cool12

While reviewing the accounts receivable aging you noticed several large 150 day
outstanding balances for accounts that were otherwise current. Upon questioning the
accounts receivable supervisor you were told that there had been a problem with the
orders. The systems shipped were defective and had been returned. The production
manager said “New systems would be shipped out so don't worry about adjusting the
books. Unfortunately, the customers canceled the orders and bought similar systems from
a competitor. You also learned that the defective systems could not be economically
repaired but were still counted and included in the ending inventory. The original saleswere recorded at $38,000. The inventory was valued at $23,000.The company uses the
direct method to record sales returns.

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