Question: McGoo Hillock Publishers Inc prepared its draft 20X4 financial statements

McGoo- Hillock Publishers Inc. prepared its draft 20X4 financial statements in February 20X5. The draft income statement showed a tentative net income of $ 550,000. After the draft statements were prepared, but prior to their approval and release, the external auditors discovered several errors:
a. Inventory of $ 25,000 that was received from an offshore publisher on 29 December 20X4 (and included in the 31 December 20X4 physical inventory count) had not been recorded as an account payable until well into January 20X5.
b. The company had shipped books worth $ 120,000 to a distant customer on 28 December 20X4. The revenue (and account receivable) was recorded by Nicodemus on 4 January 20X5.
c. Although the company’s internal auditors had discovered a calculation error in the work-sheets for the 31 December 20X4 physical inventory, the error had never been corrected. Year- end 20X4 inventory actually should have been $ 50,000 greater than recorded and reported.
d. Books costing $ 80,000 were shipped to a large chain of bookstores in the final week of the fiscal year; a sale (and receivable) of $ 125,000 had correspondingly been recorded. However, the bookstore chain actually had accepted the books only on consignment.

1. What effect will correction of these errors have on the net income for the year ended 31 December 20X4? What will be the revised 20X4 net income?
2. Suppose that these errors were not discovered until after the 20X4 statements were released. What adjustment(s), if any, should the company make on its books in 20X5?

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