s) What effect will overstating 2020's ending inventory by $1,009,000 have on 2021's ending retained earnings? ( O No effect; the RE balance will be correct. ORE will be overstated by $1,009,000 ORE will be understated by $1,009,000 We need more information to answer this question.

s) What effect will overstating 2020's ending inventory by $1,009,000 have on 2021's ending retained earnings? ( O No effect; the RE balance will be correct. ORE will be overstated by $1,009,000 ORE will be understated by $1,009,000 We need more information to answer this question.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: What has been the trend, over time, in FASB and IASB pronouncements with regard to values used in…

A: The correct answer is:They have moved towards more use of fair value, but have said that accounting…

Q: If ending inventory is understated in the current fiscal year, what effect will this have on net…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: In 2021, Jules Company realized that its ending inventory was understated byP1,50 in 2019. How…

A: Conversion cost means the total of direct labor and factory overhead where as manufacturing cost…

Q: The dollar-value LIFO inventory cost flow method involves computations based on A Specific Price…

A: The dollar value method of valuation of inventory is the valuation which is used in order to get the…

Q: hich of the following is not a retrospective-type accounting change? Question 58 options: a…

A: Solution: "Sum-of-the-years'-digits method to the straight-line method" is not a retrospective-type…

Q: Which of the following statements about the LIFO Reserve Disclosure is NOT true? a. Usually, FIFO…

A: The credit balance in the LIFO reserve reports the difference since the time that LIFO was adopted.…

Q: ssuming that ending inventory is correctly counted at the end of 2022, what effect will the…

A: Solution Concept Effect of error in the counting of the inventory…

Q: Production to stock is justified when the plant has excess production capacity. Inventory production…

A: Production to stock : Production to stock means producing required stock to consumers and providing…

Q: provided that the inventory of self-produced goods consists of only one product type, and that it is…

A: Inventories are assets:1) Goods held for sale in the ordinary business course;2) Goods in the…

Q: Blossom Corp. began operations on January 1, 2022, and uses FIFO to cost its inventory. Management…

A: INTRODUCTION: Pretax income, which is also referred to as earnings before taxes or pretax earnings,…

Q: 1. What amount should be reported as the prelax cumulative effect of this accounting change? During…

A: The inventory can be valued using various methods as LIFO, FIFO and weighted average method. The…

Q: Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods…

A: Inventory Valuation:Companies use inventory valuation, an accounting technique, to determine the…

Q: Kyto Electronics decides to adopt the average cost method of inventory valuation at the beginning of…

A: LIFO inventory method stands for 'Last In First Out' which means inventory purchased at last is sold…

Q: What is the effect of a $40000 overstatement of last year's inventory on current years ending…

A: Retained earnings: Retained earnings are share holder funds. It is to be reported in Liabilities…

Q: Which inventory valuation method would yield the lowest cost of goods sold in periods of rising…

A: FIFO method in full terms stands for First in First Out,is an important part Accounting.It is…

Q: Indicate by a (1), (2), or (0) whether each of the following events wouldprobably cause average…

A: Lessening the inventory since with conveyance through air will impact in the lead time would…

Q: following transactions for Product B during the fiscal year ended on December 31, 2020. Date…

A: The inventory can be valued using various methods as LIFO, FIFO and weighted average method.

Q: onary times LIFO assigns to inventory the costs of the oldest items acquired by the company, thus…

A: Companies can use either the FIFO or LIFO inventory valuation methodologies under US GAAP, however…

Q: Problem 20-2 (Algo) Change in principle; change in method of accounting for long-term construction…

A: Answer - The statement of shareholders' equity is a financial report of a company that shows the…

Q: 11. You are using a waterfall chart to measure the change in Annual Recurring Revenue (ARR) from…

A: Waterfall chart visually represents the change in a metric (like ARR) over time.It starts with a…

Q: PLEASE ANSWER ASAP. I WILL DO THUMBS UP. THANK YOU SO MUCH. 1. Inventory at the end of 2021 was…

A: "Since you have asked multiple questions, we will solve first question for you. If you want any…

Q: Swing Ltd uses FIFO for its inventory, which is valued at $21,000. It is considering a change to…

A: Inventory should be valued at cost or Net realisable value.

Q: Wholey Foods Company, a 100% owned subsidiary of Amazonial Corporation, was purchased by Amazonial…

A: Lets understand the basics.When parent company sold goods to subsidiary then its known downstream…

Q: Indicate by a (1), (2), or (0) whether each of the following events wouldprobably cause average…

A: The question is based on the concept of Inventory level used in business. Inventory consists of raw…

Q: Vader Corporation made two errors in counting inventory: Ending inventory for 2019 was overstated by…

A: The beginning inventory of 2020 is overstated by $15,000. This will result in an understated net…

Q: ts) An auditor recently asked an accounting manager to perform a LCM test on a batch of inventory.…

A: Valuation of Inventory: The lower of cost or market (LCM) approach stipulates that when valuing a…

Q: BETA Company began operations in January 2021. Financial statements for the years ended December 31,…

A: Retained earnings refer to the amount of profit which is retained by the business entity after the…

Q: Which inventory valuation approach comes closest to having COGS represent the costs the firm most…

A: Under average cost, Inventory and COGS value at the average price during the year. Under FIFO,…

Q: What is the effect of a $51000 overstatement of last year's inventory on current years ending…

A: When there is overstatement of ending inventory occurs, the costs of goods sold (COGS) are stated…

Q: Indicate by a (1), (2), or (0) whether each of the following events wouldprobably cause average…

A: (1) It will annual inventory holdings to rise.

Q: Indicate by a (1), (2), or (0) whether each of the following events wouldprobably cause average…

A: Average annual inventory holding is a relationship between average inventory and cost of goods sold…

Q: The following statement is TRUE / FALSE (circle one). Under current U.S. GAAP, when a firm using…

A: Cost of goods sold is described as the amount or cost which is incurred by the business to…

Q: The management of Tamarisk Company has asked its accounting department to describe the effect upon…

A: Change in accounting policies is any material change in the financial statement due to a change in…

Q: 1. Details of OCC Corp inventory balance and Cost of Good Sold are given below: $ Million 2022 2021…

A: Calculate 2022 :-FIFO Inventory Balance = LIFO Inventory…

Q: BETA Company began operations in January 2021. Financial statements for the years ended December 31,…

A: Financial statements: Financial statements are the final reports of a company, prepared at the end…

Q: Which of the following is false regarding the UFO method of inventory valuation a Value of dosing…

A: Under FIFO method of inventory valuation, inventory purchased at first are sold first.

Q: 2. What total amount should be reported as prior period error in the financial statements for the…

A: Prior Period Items are those items of Income and expense whose effect on financial statement are…

Question

s) What effect will overstating 2020's ending inventory by $1,009,000 have on 2021's ending
retained earnings? (
O No effect; the RE balance will be correct.
O RE will be overstated by $1,009,000
RE will be understated by $1,009,000
We need more information to answer this question.

Expert Solution

Step 1

RETAINED EARNINGS

Retained earnings are the amount of profit a company has left over after paying all its direct costs, indirect costs, income taxes and its dividends to shareholders.

Effect of Overstated of Beggining Inventory

When beginning inventory is overstated, COGS will be overstated and gross margin will be understated.

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

Green Company overstated its inventory by $50 million at the end of 2021. The discovery of this error (in 2023), before adjusting or closing entries, would require: A. An increase of retained earnings in 2023 balance sheet. B. A debit to inventory of $50 million in 2023 balance sheet. C. the restatement of 2021 and 2022 fınancials D. none of the above O A O B
Put yes or no in front of each of the following statements: 1- () An inventory is the inventory of assets and liabilities in terms of quantity and peak 2- () The reducing premium represents a percentage of the net value of the fixed asset 3- () The imposition of the independence of the accounting unit states that the project has an independent legal personality over the personality of the owner 4- () One of the objectives of the inventory is to determine the real value of the liabilities and assets in the project 5- () Expenses paid in advance from other credit balances that appear on the right side of the balance sheet 6- () The principle of prudence and caution stipulates that one must be careful not to record potential expenses, other than potential revenues
3. How much is the cumulative effect of this change that should be reported in the income statement for the year ended December 31, 2021? On December 31, 2021, BLACK MAMBA Company appropriately changed its inventory valuation method to average cost method from FIFO for financial statement and income tax purposes. The change will result in a $180,000 increase in the beginning inventory at January 1, 2021. Assume an income tax rate of 30%. Your answer
1. In 2021, Jules Company realized that its ending inventory was understated by P1,500 in 2019. How should Jules Company handle this? a. An adjustment to reduce inventory by P1,500 needs to be made b. An adjustment to increase cost of goods sold by P1,500 needs to be made. c. An adjustment to increase inventory by P1,500 needs to be made d. No adjustment needs to be made. 2. For interim reporting, a gain on disposal of land occurring in the third quarter is a. Recognized and allocated over the quarters b. Recognized and allocated over four quarters c. Recognized immediately in the third quarter d. Deferred until the annual reporting
(S) porins) An audit of Antwren revealed four errors that were made but never corrected. In 2021, ending inventory was overstated by $201, 000 and depreciation was overstated by $44,000. In 2022, nding inventory was understated by $111, 000 and wages expens as understated by $86, 000. What effect did these errors have 0 htwren's 2022 net income? (RE&CF 6) understated by $226, 000 overstated by $132, 000 pverstated by $157,000 inderstated by $25,000
50
PROBLEM 1: Identifying effects of common errors Requirement: Complete the schedule below by entering an Q to indicate overstatement, a I to indicate understatement, and NE if no effect. Effect of Error On: Net income Assets Liabilities Capital a. Ending inventory for 2020 understated: 2020 financial statements 2021 financial statements b. Ending inventory for 2021 overstated: 2020 financial statements 2021 financial statements c. Failed to record depreciation in 2020: 2020 financial statements 2021 financial statements d. Failed to record accrued salaries payable in 2020: 2020 financial statements 2021 financial statements e. Overstatement of accrued rent revenue in 2020: 2020 financial statements 2021 financial statements f. Failed to record a liability resulting from revenue collected in advance at end of 2020; instead, credited revenue in full erroneously: 2020 financial statements 2021 financial statements g. Failed to record an asset resulting from expenses paid in advance at end…
A large decrease in end of year grain inventory from one year to the next mistakenly left off of the 2021 accrual income statement will make 2021 net income appear: a. Lower than it really is b. As a true reflection of 2021 financial performance c. Higher than it really is d. None of the above
The following statement is TRUE / FALSE (circle one): Under Current (2020) US GAAP, any Inventory dollars related to "LIFO Layers" that are more than one year old should be classified as "Non-Current Assets" on the Balance Sheet.
3. How much is the cumulative effect of this change that should be reported in the income statement for the year ended December 31, 2021?