FirstIn Company reported profit of $90,000 in 2020. When counting its inventory on December 31, 2020, the

Question:

FirstIn Company reported profit of $90,000 in 2020. When counting its inventory on December 31, 2020, the company forgot to include items stored in a separate room in the warehouse. As a result, ending inventory was understated by $7,000.

a. What is the correct profit for 2020?

b. What effect, if any, will this error have on total assets and owner’s equity reported on the balance sheet at December 31, 2020?

c. Assuming the inventory is correctly counted on December 31, 2021, what effect, if any, will this error have on the 2021 financial statements?

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 =... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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