Question 4

PA7-5 (Supplement 7B) Analyzing and Interpreting the Effects of Inventory Errors [LO 7-S2) Partial income statements for Sherwood Company summarized for a four-year period show the following: Net Sales 2015 $1,700,000 1,241,000 Cost of Goods sold 2016 $2,100,000 1,512,000 $ 586, eee 2017 $2,200,000 1,628,000 $ 572, 880 2018 $2,700,000 1,971.000 $ 729,000 Gross Profit $ 459,000 An audit revealed that in determining these amounts, the ending Inventory for 2016 was overstated by $17,000. The inventory balance on December 31, 2017, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. 2.0. Compute the gross profit percentage for each year (@) before the correction and () after the correction 2-b. Does the pattern of gross profit percentages lend confidence to your corrected amounts? Complete this question by entering your answers in the tabs below. Raq 1 Reg 2A Reg 20 Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. SHERWOOD COMPANY Income Statements (Corrected) 2015 2016 2017 2018 Net Sales Cost of Goods Sold Gross Profit Rent Req 2A > Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. (Round your answers to the nearest whole percent.) 2016 2017 2018 2016 % % % % Before Correction After Correction % % % %