During its first four years of operation, Vaughn Co. reported the following net income. 2015 $82,800 2016 139,700 2017 166,600 2018 239,400 Vaughn is undergoing its first financial statement audit. The external auditors noted the following: 1. In early 2018, Vaughn Co. changed its estimate of bad debt expense from 2.5% of sales to 2.0% of sales. The company therefore adjusted its net income upward for 2015 through 2017 by the following amounts. 2015 $1,800 2016 4,300 2017 5,700 2. The auditor discovered that ending inventory was misstated as indicated below for the years ending 2015 and 2017: Year Amount of misstatement Direction of misstatement 2015 $20,400 Overstatement 2017 $17,700 Understatement Calculate net income to be reported in Vaughn’s comparative income statements for the years 2015 to 2018
During its first four years of operation, Vaughn Co. reported the following net income. 2015 $82,800 2016 139,700 2017 166,600 2018 239,400 Vaughn is undergoing its first financial statement audit. The external auditors noted the following: 1. In early 2018, Vaughn Co. changed its estimate of bad debt expense from 2.5% of sales to 2.0% of sales. The company therefore adjusted its net income upward for 2015 through 2017 by the following amounts. 2015 $1,800 2016 4,300 2017 5,700 2. The auditor discovered that ending inventory was misstated as indicated below for the years ending 2015 and 2017: Year Amount of misstatement Direction of misstatement 2015 $20,400 Overstatement 2017 $17,700 Understatement Calculate net income to be reported in Vaughn’s comparative income statements for the years 2015 to 2018
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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During its first four years of operation, Vaughn Co. reported the following net income.
| 2015 | $82,800 | |
| 2016 | 139,700 | |
| 2017 | 166,600 | |
| 2018 | 239,400 |
Vaughn is undergoing its first financial statement audit. The external auditors noted the following:
1. In early 2018, Vaughn Co. changed its estimate of
| 2015 | $1,800 | |
| 2016 | 4,300 | |
| 2017 | 5,700 |
2. The auditor discovered that ending inventory was misstated as indicated below for the years ending 2015 and 2017:
| Year | Amount of misstatement |
Direction of misstatement |
||
|---|---|---|---|---|
| 2015 | $20,400 | Overstatement | ||
| 2017 | $17,700 | Understatement |
Calculate net income to be reported in Vaughn’s comparative income statements for the years 2015 to 2018.
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