Answered: 2 by reducing the reported ending…

2 by reducing the reported ending inventory in both Year 1 and Year 2 by $77,000. Which of the following statements is correct for Year 27

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company overstated its ending inventory in Year 1 by $77,000. The error was not discovered until Year 3. No errors
were made in Year 2. After finding the error in Year 3, management provides restated balance sheets for Year 1 and Year
2 by reducing the reported ending inventory in both Year 1 and Year 2 by $77,000. Which of the following statements is
correct for Year 2?
Multiple Choice
No adjustments to the amounts reported for inventory or retained earnings are needed in Year 2.
The amount reported for inventory in Year 2 needs to be increased by $77,000, and the amount
reported for retained earnings in Year 2 needs to be decreased by $77,000.

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