Over a four-year period, Jackie Corporation reported the following series of gross profits. 2018 2019 2020 2021Net sales $60,000 $66,000 $74,000 $90,000Cost of goods sold 32,000 46,000 28,000 48,000Gross profit $28,000 $20,000 $46,000 $42,000In 2021, the company performed a comprehensive review of its inventory accounting procedures. Based on this review, company records reveal that ending inventory was understated by $11,000 in 2019. Inventory in all other years is correct.Required: 1. Calculate the gross profit ratio for each of the four years based on amounts originally reported. 2. Calculate the gross profit ratio for each of the four years based on corrected amounts. Describe the trend in the gross profit ratios based on the original amounts versus the corrected amounts. 3. Total gross profit over the four-year period based on the amounts originally reported equals $136,000 (= $28,000 + $20,000 + $46,000 + $42,000). Compare this amount to total gross profit over the four-year period based on the corrected amounts.
Over a four-year period, Jackie Corporation reported the following series of gross profits.
2018 2019 2020 2021
Net sales $60,000 $66,000 $74,000 $90,000
Cost of goods sold 32,000 46,000 28,000 48,000
Gross profit $28,000 $20,000 $46,000 $42,000
In 2021, the company performed a comprehensive review of its inventory accounting procedures. Based on this review, company records reveal that ending inventory was understated by $11,000 in 2019. Inventory in all other years is correct.
Required:
1. Calculate the gross profit ratio for each of the four years based on amounts originally reported.
2. Calculate the gross profit ratio for each of the four years based on corrected amounts. Describe the trend in the gross profit ratios based on the original amounts versus the corrected amounts.
3. Total gross profit over the four-year period based on the amounts originally reported equals $136,000 (= $28,000 + $20,000 + $46,000 + $42,000). Compare this amount to total gross profit over the four-year period based on the corrected amounts.
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