Question: In its physical inventory count at its February 28, 2017, year end, the Orange Sprocket Corporation included inventory that was being held for another company

In its physical inventory count at its February 28, 2017, year end, the Orange Sprocket Corporation included inventory that was being held for another company to sell on consignment. As a result, the company's inventory count showed the company having more inventory than its accounting records indicated it should have. The company adjusted its inventory and cost of goods sold accordingly. The merchandise was sold in the next year and inventory was correctly stated at February 28, 2018.
Instructions
Ignoring income tax, indicate the effect of this error (overstated, understated, or no effect) on each of the following at year end:

2018 2017 (a) Cash (b) Cost of goods sold (c) Net income (d) Retained earnings (e) Ending inventory (f) Gross profit margin ratio (40%) (g) Inventory turnover ratio (10 times)

Step by Step Solution

★★★★★

3.41 Rating (157 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

2018 2017 a Cash No effect No effect b Cost of goods s... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1274-B-C-A-E-T(603).docx

120 KBs Word File

Students Have Also Explored These Related Cost Accounting Questions!

Karen Johnson, CFO for Raucous Roasters (RR), a specialty coffee manufacturer, is rethinking her company's working capital policy in light of a recent scare she faced when RR's corporate banker,...

In its physical inventory count at its March 31, 2014, year end, Backspring Corporation excluded inventory that was being held on consignment for Backspring by another company. The merchandise was...

In its physical inventory count at its March 31, 2017, year end, Backspring Corporation excluded inventory that was being held on consignment for Backspring by another company. As a result, the...

In its physical inventory count at its March 31, 2011, year end, Backspring Corporation excluded inventory that was being held on consignment for Backspring by another company. The merchandise was...

In its physical inventory count at its February 28, 2014, year end, The Orange Sprocket Corporation included inventory that was being held for another company to sell on consignment. The merchandise...

In its physical inventory count at its February 28, 2011, year end, The Orange Sprocket Corporation included inventory that was being held for another company to sell on consignment. The merchandise...

View Policies Current Attempt in Progress In its physical inventory count at its February 28, 2017 year end the Orange Sprocket Corporation included inventory that was being held for another company...

Problem 6-7A In its physical inventory count at its February 28, 2017, year end, the Orange Sprocket Corporation included inventory that was being held for another company to sell on consignment. As...

For the normal distribution described in Exercise 7.12, what is the probability that a randomly selected tax preparation customer would have paid a fee a. Between $150 and $180? b. Under $140? c....

In the audit of the James Mobley Company, you are concerned about the possibility of contingent liabilities resulting from income tax disputes. Discuss the procedures you could use for an extensive...

P9.16 An electric carrier that automatically follows a tape track laid out on a factory floor is shown in Figure P9.16 (a) [15]. Closed-loop feedback systems are used to control the guidance and...

Doc Gibbs Company reported the following information for November and December 2010. Doc Gibbss ending inventory at December 31 was destroyed in a fire. Instructions (a) Compute the gross profit rate...

Three children are trying to balance on a seesaw, which consists of a fulcrum rock, acting as a pivot at the center, and a very light board 3.6m long (Fig. 9-50). Two playmates are already on either...

Timbuk 3 Inc. has finished a new video game, Snowboard Challenge. Management is now considering its marketing strategies. The following information is available: Anticipated sales price pr unit...

Rozema, Inc., produces chemicals for large biotech companies. It has the following data for manufacturing overhead costs during August 2013: Use F for favorable and U forunfavorable: Fixed $18,000...

Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: The projects are equally risky, and their cost of capital is 12 percent. You must...

1. Problem11.2Let X denotethenumberofheartsandY thenumberofdiamonds in a bridge hand. What is the joint probability mass function of X and Y?

Distinguish between other comprehensive income and accumulated other comprehensive income. Include in your answer how and where each is reported in the financial statements.

(a) What is the difference between a statement of changes in equity and statement of retained earnings? (b) How do each of these relate to the shareholders' equity section of the statement of...

Letson Corporation is authorized to issue 100,000 common shares. During its first two years of operation, Letson issued 60,000 shares. (a) After this transaction, how many more shares is Letson able...

Relocate tasks have become standard and one regular transfer activity is for kidneys. The most perilous part of the technique is the likelihood that the body may dismiss the new organ. There are a...

Please give answer using financial calculator, or simplest way with the formula , no excel, thanks! Based on its projected required annual rate return of 8.20%,ABC Inc. (financed only by equity)...

Post-Class Assignment 2 i\ 1\ Problem 2-3A (Static) Identify the type of account and its normal debit or credit balance (LO2-3)\ 5\ points\ 04:53:05\ Below is a list of typical accounts.\ Required:\...