Principles of Accounting Volume 1
19th Edition
ISBN: 9781947172685
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 10, Problem 13PA
Company Elmira reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 32,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
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Students have asked these similar questions
Vader Corporation made two errors in counting inventory: Ending inventory for 2019 was overstated by $15,000, and ending inventory for 2020 was understated by $12,000. If neither error was corrected, what will be the error (before taxes) in 2020 net income?
a.Overstated $27,000.
b.Understated $27,000.
c.Overstated $3,000.
d.Understated $3,000.
Redford Company hired a new store manager in October 2021, who determined the ending inventory on December 31, 2021, to be
$66,000. In March, 2022, the company discovered that the December 31, 2021 ending inventory should have been $75,600. The
December 31, 2022, inventory was correct. (Assume that the errors were not corrected until after 2022.) Ignore income taxes.
Required:
Complete the following table to show the effects of the inventory error on the four amounts listed. Give the amount of the discrepancy
and indicate whether it was overstated, understated or no effect.
Year
2021
2022
Ending Inventory
9,600 Understated
Cost of Goods Sold
Net Income
For each of the following inventory errors occurring in 2021, determine the effect of the error on 2021's cost of goods sold, net income,
and retained earnings using understated (U), overstated (O), or no effect (NE). Assume that the error is not discovered until 2022 and
that a periodic inventory system is used. Ignore income taxes.
Cost of Goods
Sold
Retained
Net Income
Earnings
1.
Overstatement of ending inventory
U
2.
Overstatement of purchases
3.
Understatement of beginning inventory
4.
Freight-in charges are understated
5
Understatement of ending inventory
6.
Understatement of purchases
7.
of beginning inventory
8.
Understatement of purchases plus understatement of ending inventory by the same amount
Chapter 10 Solutions
Principles of Accounting Volume 1
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When prices are rising (inflation), which costing...Ch. 10 - Trini Company had the following transactions for...Ch. 10 - Trini Company had the following transactions for...Ch. 10 - Calculate the cost of goods sold dollar value for...Ch. 10 - Use the first-in, first-out (FIFO) cost allocation...Ch. 10 - Use the last-in, first-out (LIFO) cost allocation...Ch. 10 - Use the weighted-average (AVG) cost allocation...Ch. 10 - Prepare journal entries to record the following...Ch. 10 - Calculate a) cost of goods sold, b) ending...Ch. 10 - Calculate a) cost of goods sold, b) ending...Ch. 10 - Calculate a) cost of goods sold, b) ending...Ch. 10 - Compare the calculations for gross margin for A76...Ch. 10 - Company Elmira reported the following cost of...Ch. 10 - Assuming a companys year-end inventory were...Ch. 10 - Use the following information relating to Shana...Ch. 10 - Use the following information relating to Clover...Ch. 10 - When prices are falling (deflation), which costing...Ch. 10 - DeForest Company had the following transactions...Ch. 10 - DeForest Company had the following transactions...Ch. 10 - Calculate the cost of goods sold dollar value for...Ch. 10 - Use the first-in, first-out method (FIFO) cost...Ch. 10 - Use the last-in, first-out method (LIFO) cost...Ch. 10 - Use the weighted-average (AVG) cost allocation...Ch. 10 - Prepare journal entries to record the following...Ch. 10 - Calculate a) cost of goods sold, b) ending...Ch. 10 - Calculate a) cost of goods sold, b) ending...Ch. 10 - Calculate a) cost of goods sold, b) ending...Ch. 10 - Compare the calculations for gross margin for B76...Ch. 10 - Company Edgar reported the following cost of goods...Ch. 10 - Assuming a companys year-end inventory were...Ch. 10 - Use the following information relating to Singh...Ch. 10 - Use the following information relating to Medinas...Ch. 10 - Assume your company uses the periodic inventory...Ch. 10 - Consider the dilemma you might someday face if you...Ch. 10 - Use a spreadsheet and the following excerpts from...
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