Marrakesh Company reported the following income statement data for the years ended December 31:

The inventories at January 1, 2020, and December 31, 2021, are correct. However, the ending inventory at December 31, 2020, was understated by $20,000.

Instructions

a. Prepare the correct income statement up to gross profit for the two years.

b. What is the combined eff ect of the inventory error on total gross profit for the two years?

Transcribed Image Text:

2021 2020 Sales Cost of goods sold Gross profit $500,000 $500,000 410,000 $ 90,000 $ 90,000