Riverbed Limited has a calendar-year accounting period. The following errors were discovered in 2017.

1.		The December 31, 2015 merchandise inventory had been understated by $51,100.
2.		Merchandise purchased on account in 2016 was recorded on the books for the first time in February 2017, when the original invoice for the correct amount of $2,600 arrived. The merchandise had arrived on December 28, 2016, and was included in the December 31, 2016 merchandise inventory. The invoice arrived late because of a mix-up by the wholesaler.
3.		Inventory, valued at $1,300, held on consignment by Riverbed was included in the December 31, 2016 count.

Calculate the effect of each error on the 2016 net income.

QUESTION:

1.		Net income/(loss) for 2016 is (PICK ONE) (no effect)/ (overstated)/ understated) by $ _______ (By how much?)
2.		Net income/(loss) for 2016 is (PICK ONE) (no effect)/ (overstated)/ understated) by $ _______ (By how much?)
3.		Net income/(loss) is (PICK ONE) (no effect)/ (overstated)/ understated) by $ _______ (By how much?)

Answer rating: 100% (QA)

Answer Solution 1 Net income overstate by 51100 Reason The beginning inventory of 2016 understated ... View the full answer