Question: Watson companys financial statements show the following the company recently

Watson Company’s financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2008, is overstated by $64,000, and inventory on December 31, 2009, is understated by $35,000.
1. For each key financial statement figure—(a), (b), (c), and (d) above—prepare a table similar to the following to show the adjustments necessary to correct the reported amounts.
Analysis Component
2. What is the error in total net income for the combined three-year period resulting from the inventory errors? Explain.
3. Explain why the overstatement of inventory by $64,000 at the end of 2008 results in an overstatement of equity by the same amount in that year.

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  • CreatedMarch 18, 2015
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