What are the effects (UNDERSTATED, OVERSTATED, NO EFFECT AT ALL) of these inventory errors on (a) the current year's ASSET, LIABILITY, OWNERS EQUITY, COST OF GOODS SOLD, NET INCOME, and (b) the subsequent year's ASSET, LIABILITY, OWNERS EQUITY, COST OF GOODS SOLD, NET INCOME? Error 1. Understatement of ending inventory and understatement of purchases, but the purchase was recorded the next year. Current Year: ASSET - LIABILITY - OWNERS EQUITY - COST OF GOODS SOLD - NET INCOME - Subsequent Year: ASSET - LIABILITY - OWNERS EQUITY - COST OF GOODS SOLD - NET INCOME - Error 2. Sales of the current year recorded in the following year (corresponding goods were properly excluded from ending inventory of the current year) Current Year: ASSET - LIABILITY - OWNERS EQUITY - COST OF GOODS SOLD - NET INCOME - Subsequent Year: ASSET - LIABILITY - OWNERS EQUITY - COST OF GOODS SOLD - NET INCOME - Include some simple explanations. Thank you.
What are the effects (UNDERSTATED, OVERSTATED, NO EFFECT AT ALL) of these inventory errors on (a) the current year's ASSET, LIABILITY, OWNERS EQUITY, COST OF GOODS SOLD, NET INCOME, and (b) the subsequent year's ASSET, LIABILITY, OWNERS EQUITY, COST OF GOODS SOLD, NET INCOME?
Error 1. Understatement of ending inventory and understatement of purchases, but the purchase was recorded the next year.
Current Year:
ASSET -
LIABILITY -
OWNERS EQUITY -
COST OF GOODS SOLD -
NET INCOME -
Subsequent Year:
ASSET -
LIABILITY -
OWNERS EQUITY -
COST OF GOODS SOLD -
NET INCOME -
Error 2. Sales of the current year recorded in the following year (corresponding goods were properly excluded from ending inventory of the current year)
Current Year:
ASSET -
LIABILITY -
OWNERS EQUITY -
COST OF GOODS SOLD -
NET INCOME -
Subsequent Year:
ASSET -
LIABILITY -
OWNERS EQUITY -
COST OF GOODS SOLD -
NET INCOME -
Include some simple explanations. Thank you.
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