Question

Rulix Watch Company reported the following income statement data for a 2-year period.


Rulix uses a periodic inventory system. The inventories at January 1, 2013, and December 31, 2014, are correct. However, the ending inventory at December 31, 2013, was overstated $6,000.

Instructions
(a) Prepare correct income statement data for the 2 years.
(b) What is the cumulative effect of the inventory error on total gross profit for the 2 years?
(c) Explain in a letter to the president of Rulix Watch Company what has happened, i.e., the nature of the error and its effect on the financialstatements.


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  • CreatedJanuary 30, 2014
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