FMA Company reported the following income statement data Inventory balances at
FMA Company reported the following income statement data:
Inventory balances at January 1, 2011, and December 31, 2012, are correct. However, the ending inventory at December 31, 2011, is overstated by $5,000.
Required
Prepare corrected data for 2011 and 2012, identify all accounts that were affected by the error and whether they were overstated or understated, and calculate the cumulative two-year effect of the inventory error on gross profit.
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