Effect of Errors in Physical Inventory Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $569,360 instead of the correct amount of $586,440. Enter all amounts as positive numbers. a.  State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply. Balance Sheet Items Understated/Overstated Amount Merchandise Inventory   $ Current Assets     Total Assets     Owner's Equity     b.  State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2. Income Statement Items Overstated/Understated Amount Cost of Merchandise Sold   $ Gross Profit     Net Income     c.  If uncorrected, what would be the effect of the error on the 20Y3 income statement? Income Statement Items Overstated/Understated Amount Cost of Merchandise Sold   $ Gross Profit     Net Income     d. If uncorrected, what would be the effect of the error on the December 31, 20Y3, balance sheet? The December 31, 20Y3, balance sheet would be correct, since the 20Y2 inventory error reverses itself in 20Y3. The December 31, 20Y3, balance sheet would be incorrect, since the 20Y2 inventory error overstates the beginning inventory in20Y3. The December 31, 20Y3, balance sheet would be incorrect, since the 20Y2 inventory error understates the beginning inventory in 20Y3.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Effect of Errors in Physical Inventory

Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $569,360 instead of the correct amount of $586,440.

Enter all amounts as positive numbers.

a.  State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply.

Balance Sheet Items Understated/Overstated Amount
Merchandise Inventory   $
Current Assets    
Total Assets    
Owner's Equity    

b.  State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2.

Income Statement Items Overstated/Understated Amount
Cost of Merchandise Sold   $
Gross Profit    
Net Income    

c.  If uncorrected, what would be the effect of the error on the 20Y3 income statement?

Income Statement Items Overstated/Understated Amount
Cost of Merchandise Sold   $
Gross Profit    
Net Income    

d. If uncorrected, what would be the effect of the error on the December 31, 20Y3, balance sheet?

  1. The December 31, 20Y3, balance sheet would be correct, since the 20Y2 inventory error reverses itself in 20Y3.
  2. The December 31, 20Y3, balance sheet would be incorrect, since the 20Y2 inventory error overstates the beginning inventory in20Y3.
  3. The December 31, 20Y3, balance sheet would be incorrect, since the 20Y2 inventory error understates the beginning inventory in 20Y3.

 

 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 3 images

Blurred answer
Knowledge Booster
Accounting Changes and Error Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education