Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y8, Madison incorrectly counted its inventory as $790,270 instead of the correct amount of $813,980.Enter all amounts as positive numbers.a. State the effects of the error on the December 31, 20Y8, balance sheet of Madison River Supply.Balance Sheet ItemsUnderstated/OverstatedAmountInventory $fill in the blank 2Current Assets $fill in the blank 4Total Assets $fill in the blank 6Stockholders’ Equity $fill in the blank 8b. State the effects of the error on the income statement of Madison River Supply for the year ended December 31, 20Y8.Income Statement ItemsOverstated/UnderstatedAmountCost of Goods Sold $fill in the blank 10Gross Profit $fill in the blank 12Net Income $fill in the blank 14c. If uncorrected, what would be the effects of the error on the 20Y9 income statement?Income Statement ItemsOverstated / UnderstatedAmountCost of Goods Sold $fill in the blank 16Gross Profit $fill in the blank 18Net Income $fill in the blank 20

The objective of the question is to understand the impact of an inventory counting error on the…

Answered: Madison River Supply Co. sells canoes,…

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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Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y8, Madison incorrectly counted its inventory as $790,270 instead of the correct amount of $813,980.

Enter all amounts as positive numbers.

a. State the effects of the error on the December 31, 20Y8, balance sheet of Madison River Supply.

Balance Sheet Items	Understated/Overstated	Amount
Inventory		$fill in the blank 2
Current Assets		$fill in the blank 4
Total Assets		$fill in the blank 6
Stockholders’ Equity		$fill in the blank 8

b. State the effects of the error on the income statement of Madison River Supply for the year ended December 31, 20Y8.

Income Statement Items	Overstated/Understated	Amount
Cost of Goods Sold		$fill in the blank 10
Gross Profit		$fill in the blank 12
Net Income		$fill in the blank 14

c. If uncorrected, what would be the effects of the error on the 20Y9 income statement?

Income Statement Items	Overstated / Understated	Amount
Cost of Goods Sold		$fill in the blank 16
Gross Profit		$fill in the blank 18
Net Income		$fill in the blank 20

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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