Lally Industries shows the following financial statement data for 2013, 2014, and 2015. Prior to issuing the
Question:
Lally Industries shows the following financial statement data for 2013, 2014, and 2015.
Prior to issuing the 2015 statements, auditors found that the ending inventory for 2013 was understated by $5,000 and that the ending inventory for 2015 was overstated by $12,000. The ending inventory at December 31, 2014, was correct.
Requirements
1. State whether each year's net income before corrections is understated or overstated and indicate the amount of the understatement or overstatement.
2. Prepare corrected income statements for the three years.
3. What is the impact on the 2015 income statement if the 2013 inventory error is left uncorrected?
Step by Step Answer:
Financial Accounting
ISBN: 978-0133375534
2nd Canadian edition
Authors: Jeffrey Waybright, Robert Kemp, Sherif Elbarrad