Condensed income statements for Saunder Company for two years are presented here. After the end of 2012, it was discovered that an error had been made in 2011. Ending inventory in 2011 should have been $ 11,000 instead of $
After the end of 2012, it was discovered that an error had been made in 2011. Ending inventory in 2011 should have been $ 11,000 instead of $ 12,000. Determine the corrected net income for 2011 and 2012.
a. Did the error understate or overstate cost of goods sold for 2011?
b. Did the error understate or overstate net income for 2011?
c. What is the amount of total net income for the two-year period with the error ($ 12,000) and with the error corrected ($11,000)?
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 =...
2012 2011 Net Sales $91,000 $98.000 Cost of Goods Sold: Merchandise Inventory (beginning) Purchases (net) Cost of Goods Available for Sale Less Merchandise Inventory (ending) Cost of Goods Sold $12,000 47000 $59,000 14,000 $15,000 49,000 $64,000 12,000 Gross Profit Operating Expenses Net Income 45,000 $46,000 23,000 $23,000 52,000 $46,000 21,000 $25,000
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a Understated cost of goods sold stated as 52 000 and should be 5…View the full answer
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