Effects of Inventory Errors
Effects of Inventory errors
Seshavradhanr Rao Maramraj
ACC 539
Week 2
August 10 2008
Effects of Inventory errors
A. The ending inventory reported in 2002was overstated by $ 23,500 for merchandise that Kirk’s Servistar hold on consignment. Therefore, the ending inventory in 2002 is $ 91400-$ 23,500 = $ 67,900 and the beginning inventory in 2003 is $ 67,900.
The correction of the 2002 and 2003 income statement is
| | |2003 | | |2002 | |
| |Sales | |$541,200 | | | | | |
| |Cost of Goods Sold: | | | | | |$523,600 | |
| |Beginning inventory |$67,900 | | | |$85,300 | | |
| |Cost of goods purchased |393,000 | | | |366,500 | | |
| |Cost of goods available for sale |$460,900 | | | |$451,800 | | |
| |Less: ending inventory |(79,800) | | | |(67,900) | | |
| |Cost of goods sold | |(381,100) | | | |(383,900) | |
| |Gross profit | |$160,100 | | | |$139,700 | |
| |Operating expenses | |(103,700) | | | |(94,700) | |
| |Net income (ignoring income taxes) | |$56,400 | | | |$45,000 | |
| | | |
Seshavradhanr Rao Maramraj
ACC 539
Week 2
August 10 2008
Effects of Inventory errors
A. The ending inventory reported in 2002was overstated by $ 23,500 for merchandise that Kirk’s Servistar hold on consignment. Therefore, the ending inventory in 2002 is $ 91400-$ 23,500 = $ 67,900 and the beginning inventory in 2003 is $ 67,900.
The correction of the 2002 and 2003 income statement is
| | |2003 | | |2002 | |
| |Sales | |$541,200 | | | | | |
| |Cost of Goods Sold: | | | | | |$523,600 | |
| |Beginning inventory |$67,900 | | | |$85,300 | | |
| |Cost of goods purchased |393,000 | | | |366,500 | | |
| |Cost of goods available for sale |$460,900 | | | |$451,800 | | |
| |Less: ending inventory |(79,800) | | | |(67,900) | | |
| |Cost of goods sold | |(381,100) | | | |(383,900) | |
| |Gross profit | |$160,100 | | | |$139,700 | |
| |Operating expenses | |(103,700) | | | |(94,700) | |
| |Net income (ignoring income taxes) | |$56,400 | | | |$45,000 | |
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