Partial income statements for Sherwood Company summarized for a four-year period show the following: An audit revealed

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Partial income statements for Sherwood Company summarized for a four-year period show the following:

Partial income statements for Sherwood Company summarized for a four-year

An audit revealed that in determining these amounts, the ending inventory for 2011 was overstated by $20,000. The inventory balance on December 31, 2012, was accurately stated. The company uses a periodic inventory system.
Required:
1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
2. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction, rounding to the nearest percentage. Do the results lend confidence to your corrected amounts? Explain.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
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Fundamentals of Financial Accounting

ISBN: 978-0078025372

4th edition

Authors: Fred Phillips, Robert Libby, Patricia Libby

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