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Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372 Exercise 65
(Supplement 7B) Analyzing and Interpreting the Effects of Inventory Errors
Partial income statements for Sherwood Company summarized for a four-year period show the following:
An audit revealed that in determining these amounts, the ending inventory for 2011 was overstated by $20,000. The inventory balance on December 31, 2012, 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. Compute the gross profit percentage for each year ( a ) before the correction and ( b ) after the correction, rounding to the nearest percentage. Do the results lend confidence to your corrected amounts Explain.
Partial income statements for Sherwood Company summarized for a four-year period show the following:
An audit revealed that in determining these amounts, the ending inventory for 2011 was overstated by $20,000. The inventory balance on December 31, 2012, 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. Compute the gross profit percentage for each year ( a ) before the correction and ( b ) after the correction, rounding to the nearest percentage. Do the results lend confidence to your corrected amounts Explain.
Explanation
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1.
From the reports, it is observed that...
Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
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