You own a retailer of boats, motors, and marine accessories. The store manager has just informed you that the amount of the physical inventory was incorrectly reported as $630,000 instead of the correct amount of $360,000. Unfortunately, yesterday you sent the quarterly financial statements to the stockholders. Now you must send revised statements and a letter of explanation. (a) What effect did the error have on the items of the balance sheet for the retailer? Express your answer as overstatedor understated for the items affected by the error. Merchandise inventory was by $ . Therefore, Current assets, Total assets, and Total stockholders' equity were by $ . (b) What effect will the error have on the items of the income statement for the retailer? The cost of goods sold was by $ . Therefore, gross profit and net income were by $ . (c) Did this error make the retailer's quarterly results look better or worse than they actually were? The inventory error made the company's quarterly results look than they actually were.
You own a retailer of boats, motors, and marine accessories. The store manager has just informed you that the amount of the physical inventory was incorrectly reported as $630,000 instead of the correct amount of $360,000. Unfortunately, yesterday you sent the quarterly financial statements to the stockholders. Now you must send revised statements and a letter of explanation. (a) What effect did the error have on the items of the balance sheet for the retailer? Express your answer as overstatedor understated for the items affected by the error. Merchandise inventory was by $ . Therefore, Current assets, Total assets, and Total stockholders' equity were by $ . (b) What effect will the error have on the items of the income statement for the retailer? The cost of goods sold was by $ . Therefore, gross profit and net income were by $ . (c) Did this error make the retailer's quarterly results look better or worse than they actually were? The inventory error made the company's quarterly results look than they actually were.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
You own a retailer of boats, motors, and marine accessories. The store manager has just informed you that the amount of the physical inventory was incorrectly reported as $630,000 instead of the correct amount of $360,000. Unfortunately, yesterday you sent the quarterly financial statements to the stockholders. Now you must send revised statements and a letter of explanation.
(a)
What effect did the error have on the items of the balance sheet for the retailer? Express your answer as overstatedor understated for the items affected by the error.
Merchandise inventory was by $ . Therefore, Current assets, Total assets, and Total stockholders' equity were by $ .
(b)
What effect will the error have on the items of the income statement for the retailer?
The cost of goods sold was by $ . Therefore, gross profit and net income were by $ .
(c)
Did this error make the retailer's quarterly results look better or worse than they actually were?
The inventory error made the company's quarterly results look than they actually were.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education