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Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall
Edition 11ISBN: 978-1259535314Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall
Edition 11ISBN: 978-1259535314 Exercise 3
Effects of inventory error Assume that the ending inventory of a merchandising firm is overstated by $20,000.
Required:
a. By how much and in what direction (overstated or understated) will the firm's cost of goods sold be misstated?
b. If this error is not corrected, what effect will it have on the subsequent period's operating income?
c. If this error is not corrected, what effect will it have on the total operating income of the two periods (the period in which there is an error and the subsequent period) combined?
Required:
a. By how much and in what direction (overstated or understated) will the firm's cost of goods sold be misstated?
b. If this error is not corrected, what effect will it have on the subsequent period's operating income?
c. If this error is not corrected, what effect will it have on the total operating income of the two periods (the period in which there is an error and the subsequent period) combined?
Explanation
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(a) Inventory is defined as the stock of...
Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall
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