Parker Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, included product X . Relevant per-unit data for product X are as follows. Estimated selling price $50 Cost $40 Estimated selling expenses $14 Normal profit $ 9 There were 1,000 units of product X on hand at December 31, 2017 was incorrectly valued at $38 per unit for reporting purposes. All 1,000 units were sold in 2018. Instuctions : Compute the effect of this error on net income for 2017 and the effect on net income for 2018, and indicate the direction of the misstatement for each year.
Parker Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, included product X . Relevant per-unit data for product X are as follows. Estimated selling price $50 Cost $40 Estimated selling expenses $14 Normal profit $ 9 There were 1,000 units of product X on hand at December 31, 2017 was incorrectly valued at $38 per unit for reporting purposes. All 1,000 units were sold in 2018. Instuctions : Compute the effect of this error on net income for 2017 and the effect on net income for 2018, and indicate the direction of the misstatement for each year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Topic Video
Question
Parker Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items.
The inventory at December 31, 2017, included product X . Relevant per-unit data for product X are as
follows.
Estimated selling price $50
Cost $40
Estimated selling expenses $14
Normal profit $ 9
There were 1,000 units of product X on hand at December 31, 2017 was incorrectly valued at $38 per
unit for reporting purposes. All 1,000 units were sold in 2018.
Instuctions :
Compute the effect of this error on net income for 2017 and the effect on net income for 2018, and
indicate the direction of the misstatement for each year.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education