Bailey Corporation uses a periodic inventory system. Beginning inventory on January 1, 2024 was overstated by $42,000, and its ending inventory on December 31, 2024 was overstated by $40,000. Additionally, a purchase of inventory costing $36,000 was incorrectly recorded as $3,600. These errors were not discovered until 2025. Assuming the errors are not discovered until 2026, is Bailey's cost of goods sold in 2024 overstated or understated? (2 points] A Overstated B Understated What is the dollar amount of the overstatement/understatement of cost of goods sold in 2024? (2 points] $ Assuming the errOrs are not discovered until 2026, is Bailey's gross profit in 2025 overstated or understated? (2 points] A Overstated B Understated What is the dollar amount of the overstatement/understatement of gross profit in 2025? (2 points] Prepare Bailey's journal entry in 2025 to correct the error, assuming the errors were discovered in 2025. 2 points] Account Debit Credit No Journal Entry Required.

Answer rating: 100% (QA)

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