The income statement for Sherwood Company summarized for a four-year period shows the following: An audit revealed
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The income statement for Sherwood Company summarized for a four-year period shows the following:
An audit revealed that in determining these amounts, the ending inventory for 2010 was overstated by $22,000. The company uses a periodic inventory system.
Required:
1. Recast the income statements to reflect the correct amounts, taking into consideration the inventory error.
2. Compute the gross profit percentage for each year
(a) Before the correction
(b) After the correction.
3. What effect would the error have had on the income tax expense assuming a 30 percent averagerate?
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
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