Wu Watch Company, Ltd. reported the following income statement data for a 2-year period. Wu uses a
Question:
Wu uses a periodic inventory system. The inventories at January 1, 2016, and December 31, 2017, are correct. However, the ending inventory at December 31, 2016, was understated HK$60,000.
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 Wu Watch Company, Ltd. what has happened, i.e., the nature of the error and its effect on the financial statements.
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Related Book For
Financial Accounting
ISBN: 978-1118978085
IFRS 3rd edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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