The income statements for Graul Corporation for the three years ending in 2011 appear below.
During 2011, Graul discovered that the 2009 ending inventory had been misstated due to the following two transactions being recorded incorrectly.
a. A purchase return of inventory costing $42,000 was recorded twice.
b. A credit purchase of inventory made on December 20 for $28,500 was not recorded. The goods were shipped F.O.B. shipping point and were shipped on December 22, 2009.
1. Was ending inventory for 2009 overstated or understated? By how much?
2. Prepare correct income statements for all three years.
3. Did the error in 2009 affect cumulative net income for the three-year period? Explain your response.
4. Why was the 2011 net income unaffected?

  • CreatedSeptember 22, 2015
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