Lombardo Lumber Company incorrectly recorded inventory in 2017. Rather than recording ending inventory as $500, Lombardo's accounting manager entered $560, overstating ending inventory by $60.

An inventory summary for 2017 and 2018 as actually recorded b y the company follows.

Required

a. Prepare an analysis of this error over the 2-year period, recommend any correcting entries required to correct the inventory error, and comment on the effect of the error o n gross profit. Assume that Lombardo discovered the error in 2018 before closing the books.

b. What correcting entries are necessary if Lombardo discovered the error in 2019 after closing the books for 2018?

Transcribed Image Text:

2017 2018 Beginning inventory Purchases Beginning inventory Purchases Availab e $ 560 $200 +600 +600 Available $ 800 (560) $240 $1.160 Ending inventory Cost of oods soid (900) Ending nventory Cost of goods so d $ 260