Partial income statements for Sherwood Company summarized for a four-year period show the following: 2018 2019 2020 2021 Net Sales $ 2,300,000 $ 2,700,000 $ 3,300,000 $ 2,800,000 1,820,000 $ 980,000 Cost of Goods Sold 1,472,000 1,701,000 2,112,000 Gross Profit $ 828,000 $ 999,000 $ 1,188,000 An audit revealed that in determining these amounts, the ending inventory for 2019 was overstated by $21,200. The inventory balance on December 31, 2020, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. 2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. 2-b. Do the results lend confidence to your corrected amounts?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Partial income statements for Sherwood Company summarized for a four-year period show the following:
2018
2019
2020
2021
$ 2,300,000
1,472,000
$ 2,700,000
1,701,000
$ 2,800,000
1,820,000
$ 3,300,000
2,112,000
Net Sales
Cost of Goods Sold
Gross Profit
$ 828,000
$ 999,000
$ 980,000
$ 1,188,000
An audit revealed that in determining these amounts, the ending inventory for 2019 was overstated by $21,200. The inventory balance
on December 31, 2020, was accurately stated. The company uses a periodic inventory system.
Required:
1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction.
2-b. Do the results lend confidence to your corrected amounts?
Transcribed Image Text:Partial income statements for Sherwood Company summarized for a four-year period show the following: 2018 2019 2020 2021 $ 2,300,000 1,472,000 $ 2,700,000 1,701,000 $ 2,800,000 1,820,000 $ 3,300,000 2,112,000 Net Sales Cost of Goods Sold Gross Profit $ 828,000 $ 999,000 $ 980,000 $ 1,188,000 An audit revealed that in determining these amounts, the ending inventory for 2019 was overstated by $21,200. The inventory balance on December 31, 2020, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. 2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. 2-b. Do the results lend confidence to your corrected amounts?
Complete this question by entering your answers in the tabs below.
Req 1
Req 2A
Req 2B
Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
SHERWOOD COMPANY
Income Statements (Corrected)
2018
2019
2020
2021
Net Sales
Cost of Goods Sold
Gross Profit
< Req 1
Req 2A >
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. SHERWOOD COMPANY Income Statements (Corrected) 2018 2019 2020 2021 Net Sales Cost of Goods Sold Gross Profit < Req 1 Req 2A >
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