Cherokee Company's auditor discovered some errors. No errors were corrected during 2017. The errors are described as follows:
(1.) Beginning inventory on January 1, 2017, was understated by $5,000.
(2.) A two-year insurance policy purchased on April 30, 2017, in the amount of $24,000 was debited to Prepaid Insurance. No adjustment was made on December 31, 2017, or on December 31, 2018.
Required:
Prepare appropriate journal entries (assume the 2018 books have not been closed). Ignore income taxes.

Question

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The Answer of Cherokee Company's auditor discovered some errors. No errors were corrected during 2017. The errors are described as follows:
(1.) Beginning inventory on January 1, 2017, was understated by $5,000.
(2.) A two-year insurance policy purchased on April 30, 2017, in the amount of $24,000 was debited to Prepaid Insurance. No adjustment was made on December 31, 2017, or on December 31, 2018.
Required:
Prepare appropriate journal entries (assume the 2018 books have not been closed). Ignore income taxes.

Cherokee Company's Auditor Discovered Some Errors