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

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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.

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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
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
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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.