A list of errors is shown below:Show the effects of the errors on the indicated balance sheet and income statement items.ErrorsCost ofGoods SoldRetainedEarningsYear-EndWorkingCapitalEnding inventory is overstated Beginning inventory is overstated Ending inventory is understated Beginning inventory is understated Purchases is overstated (recorded twice) Purchases is understated (not recorded) ### Errors Affecting Financial StatementsThe table below outlines different types of errors and their impacts on financial statements, specifically focusing on Cost of Goods Sold, Retained Earnings, and Year-End Working Capital.#### Errors and Potential Effects:1. **Ending inventory is overstated** - **Potential Effects:** - **Cost of Goods Sold:** Options - Overstated, Understated, No Effect - **Retained Earnings:** Adjust the dropdown - **Year-End Working Capital:** Adjust the dropdown2. **Beginning inventory is overstated** - **Potential Effects:** - **Cost of Goods Sold:** Options - Overstated, Understated, No Effect - **Retained Earnings:** Adjust the dropdown - **Year-End Working Capital:** Adjust the dropdown3. **Ending inventory is understated** - **Potential Effects:** - **Cost of Goods Sold:** Options - Overstated, Understated, No Effect - **Retained Earnings:** Adjust the dropdown - **Year-End Working Capital:** Adjust the dropdown4. **Beginning inventory is understated** - **Potential Effects:** - **Cost of Goods Sold:** Options - Overstated, Understated, No Effect - **Retained Earnings:** Adjust the dropdown - **Year-End Working Capital:** Adjust the dropdown5. **Purchases are overstated (recorded twice)** - **Potential Effects:** - **Cost of Goods Sold:** Options - Overstated, Understated, No Effect - **Retained Earnings:** Adjust the dropdown - **Year-End Working Capital:** Adjust the dropdown6. **Purchases are understated (not recorded)** - **Potential Effects:** - **Cost of Goods Sold:** Options - Overstated, Understated, No Effect - **Retained Earnings:** Adjust the dropdown - **Year-End Working Capital:** Adjust the dropdown### Explanation of Diagram:Each row represents a specific type of error, and each column corresponds to a different aspect of the financial statements that might be affected. Drop-down menus allow the selection of possible effects each error may have: "Overstated," "Understated," or "No Effect." This feature aids in understanding how inventory and purchase errors can negatively influence key financial metrics.

Name: A list of errors is shown below:Show the effects of the errors on the
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Description: A list of errors is shown below:Show the effects of the errors on the indicated balance sheet and income statement items.ErrorsCost ofGoods SoldRetainedEarningsYear-EndWorkingCapitalEnding inventory is overstated Beginning inventory is overstated

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Answered: A list of errors is shown below: Show…

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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A list of errors is shown below:

Show the effects of the errors on the indicated balance sheet and income statement items.

Errors	Cost of Goods Sold	Retained Earnings	Year-End Working Capital
Ending inventory is overstated
Beginning inventory is overstated
Ending inventory is understated
Beginning inventory is understated
Purchases is overstated (recorded twice)
Purchases is understated (not recorded)

### Errors Affecting Financial Statements

The table below outlines different types of errors and their impacts on financial statements, specifically focusing on Cost of Goods Sold, Retained Earnings, and Year-End Working Capital.

#### Errors and Potential Effects:

1. **Ending inventory is overstated**
- **Potential Effects:**
- **Cost of Goods Sold:** Options - Overstated, Understated, No Effect
- **Retained Earnings:** Adjust the dropdown
- **Year-End Working Capital:** Adjust the dropdown

2. **Beginning inventory is overstated**
- **Potential Effects:**
- **Cost of Goods Sold:** Options - Overstated, Understated, No Effect
- **Retained Earnings:** Adjust the dropdown
- **Year-End Working Capital:** Adjust the dropdown

3. **Ending inventory is understated**
- **Potential Effects:**
- **Cost of Goods Sold:** Options - Overstated, Understated, No Effect
- **Retained Earnings:** Adjust the dropdown
- **Year-End Working Capital:** Adjust the dropdown

4. **Beginning inventory is understated**
- **Potential Effects:**
- **Cost of Goods Sold:** Options - Overstated, Understated, No Effect
- **Retained Earnings:** Adjust the dropdown
- **Year-End Working Capital:** Adjust the dropdown

5. **Purchases are overstated (recorded twice)**
- **Potential Effects:**
- **Cost of Goods Sold:** Options - Overstated, Understated, No Effect
- **Retained Earnings:** Adjust the dropdown
- **Year-End Working Capital:** Adjust the dropdown

6. **Purchases are understated (not recorded)**
- **Potential Effects:**
- **Cost of Goods Sold:** Options - Overstated, Understated, No Effect
- **Retained Earnings:** Adjust the dropdown
- **Year-End Working Capital:** Adjust the dropdown

### Explanation of Diagram:

Each row represents a specific type of error, and each column corresponds to a different aspect of the financial statements that might be affected. Drop-down menus allow the selection of possible effects each error may have: "Overstated," "Understated," or "No Effect." This feature aids in understanding how inventory and purchase errors can negatively influence key financial metrics.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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