Cherokee Company's Auditor Discovered Some Errors

question 107

Essay

Cherokee Company's auditor discovered some errors. No errors were corrected during 2012. The errors are described as follows:
(1.) Beginning inventory on January 1, 2012, was understated by $5,000.
(2.) A two-year insurance policy purchased on April 30, 2012, in the amount of $24,000 was debited to Prepaid Insurance. No adjustment was made on December 31, 2012, or on December 31, 2013.
Required:
Prepare appropriate journal entries (assume the 2013 books have not been closed). Ignore income taxes.

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Definitions:

Lifestyle Segmentation

The practice of dividing the market based on consumers' lifestyles, including their attitudes, values, and activities.

Geodemographic Segmentation

A method of market segmentation that combines demographics with geographic location to identify market segments with similar characteristics and behaviors.

Psychographic Segmentation

A marketing strategy that divides a market based on consumer personality traits, lifestyles, interests, attitudes, and values.

Geographic Segmentation

The division of a market into different geographical units such as countries, states, regions, cities, or neighborhoods, to tailor marketing efforts to local preferences and conditions.