Seles Hardware Limited reported the following amounts for its cost of goods sold and merchandise inventory: _________________________________2015
Question:
Seles Hardware Limited reported the following amounts for its cost of goods sold and merchandise inventory:
_________________________________2015 __________2014
Cost of goods sold ....................... $168,000 ......... $154,000
Ending inventory ........................... 37,000 ............ 30,000
Seles made two errors:
(1) Ending inventory for 2015 was overstated by $2,000 and
(2) Ending inventory for 2014 was understated by $4,000.
Instructions
(a) Calculate the correct Ending inventory and cost of goods sold amounts for each year.
(b) Describe the impact of the error on
(1) Cost of goods sold,
(2) Profit before income tax,
(3) Assets,
(4) Liabilities, and
(5) Total shareholders' equity for each of the two years.
(c) Explain why it is important that Seles Hardware correct these errors as soon as they are discovered.
Ending InventoryThe 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 =...
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118644942
6th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine