8. On 12/30/20, Redding Corporation sold merchandise for $75,000 to Norbert Company. The terms of the sale were net 30, FOB shipping point. The merchandise was shipped on 12/31/20, and arrived at Norbert on 1/5/21. Because of a clerical error, Redding did not record the sale until 1/7/21, and the merchandise (before Redding's 25% markup on cost) was included in Redding's inventory at 12/31/20. As a result, Redding's net income for the year ended 12/31/20 was: a. Overstated by $75,000. b. Understated by $60,000. c. Understated by $15,000. d. Correctly stated; not impacted by inventory.

8. On 12/30/20, Redding Corporation sold merchandise for $75,000 to Norbert Company. The terms of the sale were net 30, FOB shipping point. The merchandise was shipped on 12/31/20, and arrived at Norbert on 1/5/21. Because of a clerical error, Redding did not record the sale until 1/7/21, and the merchandise (before Redding's 25% markup on cost) was included in Redding's inventory at 12/31/20. As a result, Redding's net income for the year ended 12/31/20 was: a. Overstated by $75,000. b. Understated by $60,000. c. Understated by $15,000. d. Correctly stated; not impacted by inventory.

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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