It is discovered in 2021 that ending inventory in 2019 was understated. What is the effect of the understatement on the following:2019: Cost of goods sold Net income Ending retained earnings2020: Net purchases Cost of goods sold Net income Ending retained earnings

It is discovered in 2021 that ending inventory in 2019 was understated. What is the effect of the understatement on the following:2019: Cost of goods sold Net income Ending retained earnings2020: Net purchases Cost of goods sold Net income Ending retained earnings

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: LIFO reserve 2019=FIFO-LIFO=$78,650-68,500=$10,150

Question

It is discovered in 2021 that ending inventory in 2019 was understated. What is the effect of the understatement on the following:
2019: Cost of goods sold
Net income
Ending retained earnings
2020: Net purchases
Cost of goods sold
Net income
Ending retained earnings

Definition Definition Remaining net income of the company after the required dividends are paid to shareholders. This surplus money is usually invested back into the business to expand its business operations or launch a new product.

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