The net income per books of Linda Patrick Company was determined without knowledge of the errors indicated. Year Net Incomeper Books   Error in Ending   Inventory    2015 $50,000   Overstated $ 3,000 2016  52,000   Overstated 9,000 2017  54,000   Understated 11,000 2018  56,000   No error   2019  58,000   Understated 2,000 2020  60,000   Overstated 8,000 Instructions Prepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventory errors.

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A:

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.