Assuming a periodic inventory system, how would Sue's cost of goods sold, gross profit, and net income be affected in 2020 by these errors?
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- Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statementsIndicate the effect of each of the following errors on the following balance sheet and income statement items for the current and succeeding years: beginning inventory, ending inventory, accounts payable, retained earnings, purchases, cost of goods sold, net income, and earnings per share. a. The ending inventory is overstated. b. Merchandise purchased on account and received was not recorded in the purchases account until the succeeding year although the item was included in inventory of the current year. c. Merchandise purchased on account and shipped FOB shipping point was not recorded in either the purchases account or the ending inventory. d. The ending inventory was understated as a result of the exclusion of goods sent out on consignment.Company Elmira reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 32,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
- The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 2019: a. Prepare the cost of merchandise sold section of the income statement for the year ended April 30, 2019, using the periodic inventory system. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 2019. c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?Identify the errors in the following schedule of the cost of merchandise sold for the year ended May 31, 2018:Errors As controller of Lerner Company, which uses a periodic inventory system, you discover the following errors in the current year: 1. Merchandise with a cost of 17,500 was properly included in the final inventory, but the purchase was not recorded until the following year. 2. Merchandise purchases are in transit under terms of FOB shipping point. They have been excluded from the inventory, but the purchase was recorded in the current year on the receipt of the invoice of 4,300. 3. Goods out on consignment have been excluded from inventory. 4. Merchandise purchases under terms FOB shipping point have been omitted from the purchases account and the ending inventory. The purchases were recorded in the following year. 5. Goods held on consignment from Talbert Supply Co. were included in the inventory. Required: For each error, indicate the effect on the ending inventory and the net income for the current year and on the net income for the following year.
- Under the periodic inventory system, what account is debited when an estimate is made for the cost of merchandise inventory sold this year, but expected to be returned next year? (a) Estimated Returns Inventory (b) Sales Returns and Allowances (c) Merchandise Inventory (d) Customer Refunds PayableEffects of an Error in Ending Inventory Waymire Company prepared the partial income statements presented below for 2019 and 2018. During 2020, Waymires accountant discovered that ending inventory for 2018 had been understated by $6,500. Required: 1. Prepare corrected income statements for 2019 and 2018. 2. Prepare a schedule showing each financial statement item affected by the error and the amount of the error for that item (ignore the effect of income taxes). Indicate whether each error is an overstatement (+) or an understatement (-).If a group of inventory items costing $3,200 had been double counted during the year-end inventory count, what impact would the error have on the following inventory calculations? Indicate the effect (and amount) as either (a) none, (b) understated $______, or (c) overstated $______. Table 10.2
- At the end of 2019, Manny Company recorded its ending inventory at 350,000 based on a physical count. During 2020, the company discovered that the correct inventory value at the end of 2019 should have been 400,000 because it made a counting error. Upon discovery of this error in 2020, what correcting journal entry will Manny make? Ignore income taxes.Borys Companys periodic inventory at December 31, 2019, is understated by 10,000, but purchases are correct. Johnson correctly values its 2020 ending inventory. What is the effect of this error on Boryss 2019 and 2020 financial statements?The accountant for Suzanne Company made the following errors related to inventory in 2020: 1. The beginning inventory for 2020 was overstated by $1,375 due to an error in the physical count. 2. A $1,650 purchase of merchandise on credit in 2020 was not recorded or included in the ending inventory. Assuming a periodic inventory system, how would Sue's cost of goods sold, gross profit, and net income be affected in 2020 by these errors? Set Cost of Goods Sold Gross Profit Net Income I. Overstated Understated Understated II. Overstated Understated No effect III. Understated Overstated Overstated IV. No effect No effect No effect a. Set I b. Set II c. Set III d. Set IV