ABC Publishers Inc.'s draft 2019 financial statements showed a tentative net income of $550,000. After the draft statements were prepared, but prior to their approval and release, the external auditors discovered two errors as listed in the table below.

Required:

1. What effect will the correction of these errors have on the net income for the year ended 31 December 2019? Indicate the amount and sign (+ or -) of the adjustment you need to make to net income for items a and b below. (4 marks)

Errors	Effect of correcting errors on 2019 net income
Inventory of $25,000 was received from an offshore publisher on December 29, 2019 (and included in the December 31, 2019, physical inventory count). The purchase had not been recorded as an account payable until well into January 2020. ABC used a periodic system.
Books costing $80,000 were shipped to a large chain of bookstores in the final week of the fiscal year; a sale (and receivable) of $125,000 had correspondingly been recorded. However, the bookstore chain actually had accepted the books only on consignment.

2. What will be the revised 2019 net income? (2 marks) ____________________

Answer rating: 100% (QA)

1 Errors a Inventory of 25000 received on Dec 29 2019 b Boo... View the full answer