URGENT HELP

Analyzing Impact of Inventory Errors on Reporting

The records of Largo Company reveal the following.

Sales revenue		$123,000
Cost of goods sold
Beginning inventory	$6,000
Purchases	63,000
Goods available for sale	69,000
Ending inventory	15,000	54,000
Gross margin		69,000
Operating expenses		36,000
Income (pretax)		$33,000

The following errors were found, and they have not yet been corrected.

1. Revenues of $3,000 collected in advance are included in Sales Revenue. 2. Accrued operating expenses of $4,200 are not recorded. 3. Goods costing $6,000 are incorrectly included in ending inventory. (They are being held on consignment.) No purchase was recorded. 4. Goods costing $3,000 are correctly included in ending inventory; however, no purchase was recorded (assume a credit purchase).

a. Prepare a revised income statement on a correct basis.

Note: Do not use negative signs with your answers.

Sales revenue
Cost of goods sold
Beginning inventory
Purchases
Goods available for sale
Ending inventory
Gross margin
Operating expenses
Income (pretax)

b. Determine the amount of overstatement or understatement in the following balance sheet accounts: (1) Inventory, (2) Accounts Payable, (3) Deferred Revenue, (4) Accrued Expenses, and (5) Retained Earnings.

Note: If a correction is not required, select "N/A" and leave the amount answer blank (zero).

Note: Do not use negative signs with your answers.

Account	Overstated or Understated	Amount
Inventory	OverstatedUnderstatedN/A
Accounts payable	OverstatedUnderstatedN/A
Deferred revenue	OverstatedUnderstatedN/A
Accrued expenses	OverstatedUnderstatedN/A
Retained earnings	OverstatedUnderstatedN/A