Exercise 5-12 Analysis of inventory errors LO A2

[The following information applies to the questions displayed below.]

Vibrant Company had $850,000 of sales in each of three consecutive years 20122014, and it purchased merchandise costing $500,000 in each of those years. It also maintained a $250,000 physical inventory from the beginning to the end of that three-year period. In accounting for inventory, it made an error at the end of year 2012 that caused its year-end 2012 inventory to appear on its statements as $230,000 rather than the correct $250,000.

1.	Determine the correct amount of the companys gross profit in each of the years 2012 2014.

VIBRANT COMPANY
Comparative Income Statements
	2012		2013		2014		3-year total
							$0
Cost of goods sold
	0		0		0
Cost of goods sold		0		0		0	0
Gross profit		$0		$0		$0	$0

2.

Prepare comparative income statements as in Exhibit 5.11 to show the effect of this error on the companys cost of goods sold and gross profit for each of the years 2012 2014.

VIBRANT COMPANY
Comparative Income Statements
	2012		2013		2014		3-year total
							$0
Cost of goods sold
	0		0		0
Cost of goods sold		0		0		0	0
Gross profit		$0		$0		$0	$0