E8-24 (L05) (Inventory Errors-Periodic) Ann M. Martin Company makes the following errors during the current year.(Evaluate each case independently and assume ending inventory in the following year is correctly stated.)2. Both ending inventory and purchases and related accounts payable are understated. (Assume this purchase was recordedand paid for in the following year.)InstructionsIndicate the effect of each of these errors on working capital, current ratio (assume that the current ratio is greater than 1),retained earnings, and net income for the current year and the subsequent year.

Effect of error on Working capital of the current and subsequent year:In current year, the Purchases…

Answered: E8-24 (L05) (Inventory Errors-Periodic)…

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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At the beginning of the year Candle Co. has an inventory balance of $32,000. The company has net income for the year of $56,000. Later, the accountant discovers an error that caused the beginning invenotory to be understated by $6,000. a. Assuming no other changes, what is the correct net income for the year? b. If the error was discovered after year-end, what was the effect of the error on the balance sheet? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Willamill Company showed pre-tax income of P2,500,000 for the year ended December 31, 2025. On your year-end verification of the transactions of the Company, you discovered the following errors: P1,000,000 worth of merchandise was purchased in 2025 and included in the ending inventory. However, the purchase was recorded only in 2026. A merchandise shipment valued at P1,500,000 was properly recorded as purchases at year-end. The merchandise was inadvertently omitted from the physical count, since it has not arrived by December 31, 2025. Value added tax for the fourth quarter of 2025, amounting to P500,000 was included in the Sales account. Rental of P300,000 on an equipment, applicable for six months, was received on November 1, 2025. The entire amount was reported as revenue upon receipt. Rent paid on building covering the period from July 1, 2025 to July 1, 2026, amounting to P1,200,000, was paid and recorded as expense on July 1, 2025. The company did not make any adjustment at the…
Office Outfitters Inc. which uses a perpetual inventory system, experienced an inventory shrinkage of $3,750. What accounts would be increased and decreased to record the adjustment for the inventory shrinkage at the end of the accounting period?
During the taking of its physical inventory on December 31, 20Y3, Zula Company incorrectly counted its inventory as $116,985 instead of the correct amount of $131,025. Indicate the effect of the misstatement on Zula's December 31, 20Y3, balance sheet or income statement for the year ended December 31, 20Y3. For each, select if the amount is overstated or understated. Then, input the over or under amount, entered as a positive value. Line Item Description Financial Statement Understated or Overstated Amount Current assets $fill in the blank 3 Gross profit $fill in the blank 6 Inventory $fill in the blank 9 Net income $fill in the blank 12 Stockholders' equity $fill in the blank 15 Total assets $fill in the blank 18
During 20x3, Pryor Company changed its inventory method from the LIFO to FIFO. The beginning inventory under FIFO is $20,000 higher than under LIFO. Prepare the journal entry to record this accounting change. Ignore income tax.
If Soda Popinski's Company's ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?
If Wakowski Company's ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any? If no entry is required, select "None" and leave the amount boxes blank. Balance Sheet: Merchandise Inventory $4 Current Assets Total Assets Retained Earnings Income Statement: Cost of Goods Sold Gross Profit/Gross Margin Net Income
6. On January 1, 2011, Folk Company changed from the average cost method to the FIFO method to account for its inventory. Ending inventory for each method was given below. Folk Company accrues tax expense on December 31 of each year and pays the tax in April of the following year. The income tax rate is 30%. What is the net income to be reported in 2011 after the change to the FIFO inventory method? a. 1,610,000 b. 2,300,000 c. 1,750,000 d. 1,890,000
While examining the December 31, 2010 financial statements of Dawn Company, the following errors are discovered:  Inventory at January 1 had been overstated by P50,000.;  Inventory at December 31 was understated by P100,000.;  During 2010, Dawn received a P200,000 cash advance from customer for merchandise to be manufactured and shipped during 2011. The collection was credited to sales revenue.;  The net income reported on the 2010 income statement before reflecting any adjustments for the above items is P5,000,000. What is the corrected net income for the year ended December 31, 2010? Choices; 4,950,000 5,150,000 5,100,000 4,850,000
Massi pharmacies, Inc. started operations on January 1 2X11. The company used the average cost method t=o value inventory. Effective January 1 2X15, Massi elected to change its inventory method to the FIFO basis for reporting purposes. The following information is available for net income for average cost and for FIFO, Year ended Net Income Using Average cost Net Income Using FIFO After Tax Difference After Tax Cumulative Effect December 31, 2X11 $235,000 $310,000 $75,000 $75,000 December 31, 2X12 $300,000 $376,000 $76,000 $151,000 December 31, 2X13 $310,000 $400,500 $90,500 $241,000 December 31, 2X14 $425,000 $535,000 $109,500 $351,000 December 31, 2X15 $500,000 $585,000 $85,000

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