a. To determine Prepare the revised three-year abbreviated income statement summary. Explanation Income statement : The financial statement which reports revenues and expenses from business operations and the result of those operations as gross profit or net loss for a particular time period is referred to as income statement. Prepare the revised three-year abbreviated income statement summary as follows: (1) An arithmetic error in the computation of inventory at the end of 2016 has caused a $20,000 understatement in the inventory: In this case, the amount of ending inventory for the year 2016 is understated by $20,000, and this error is not rectified until at the end of the accounting year 2017. This error is rectified by the understated amount of ending inventory is added to the gross profit for the year 2016, because ending inventory for the year 2016 would increase the value of gross profit. In the year 2017, the understated amount of ending inventory in the year 2016 is treated as the opening inventory for the year 2017, and this error is rectified by the understated amount of opening inventory for the year 2017 is deducted from the gross profit, because opening inventory for the year 2018 would decrease the value of gross profit. (2) A duplication of figures in the computation of inventory at the end of 2018 had caused on overstatement of $80,000. In this case, the amount of ending inventory for the year 2018 is overstated by $80,000, and this error is not rectified until at the end of the accounting year 2018... b. To determine Comment the trends of gross profit and gross profit percentage before and after the revision.

18th Edition

ISBN: 9781260706307

Author: Jan Williams

Publisher: Mcgraw-hill Higher Education (us)

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Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

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Chapter 8, Problem 6BP

To determine

Prepare the revised three-year abbreviated income statement summary.

To determine

Comment the trends of gross profit and gross profit percentage before and after the revision.

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Chapter 8, Problem 5BP

Chapter 8, Problem 7BP

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Chapter 8 Solutions

Financial Accounting

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