Question

Oriole Company reported the following amounts for its cost of goods sold and ending inventory: 2021...

Oriole Company reported the following amounts for its cost of goods sold and ending inventory:
2021 2020

Cost of goods sold

$170,000 $175,000

Ending inventory

30,000 30,000

Oriole made two errors: (1) 2020 ending inventory was overstated by $10,500, and (2) 2021 ending inventory was understated by $9,000.

Calculate the correct cost of goods sold and ending inventory for each year.

2021 2020

Correct ending inventory

$enter a dollar amount $enter a dollar amount

Correct cost of goods sold

$enter a dollar amount $enter a dollar amount

Describe the impact of the errors on profit for 2020 and 2021 and on owner’s equity at the end of 2020 and 2021.

In 2020 profit is select an option

overstatedunderstated

by $enter a dollar amount , the amount of the error in ending inventory. This error flows through to owner’s equity in 2020 to produce an select an option

overstatementunderstatement

of $enter a dollar amount .
In 2021 both errors have an impact. The net effect is an select an option

overstatementunderstatement

of profit by $enter a dollar amount . This is a result of the $10,500 select an option

understatementoverstatement

of the beginning inventory plus $enter a dollar amount select an option

understatementoverstatement

of ending inventory.
Owner’s equity in 2021 would show only an select an option

understatementoverstatement

of $enter a dollar amount . The $10,500 select an option

understatementoverstatement

of 2020 would be offset by the $10,500 select an option

understatementoverstatement

in profit caused by the impact on beginning inventory in 2021.

Homework Answers

Answer #1
2021 2020
Correct ending inventory $ 39,500 $ 19,500
(30,000 + 9,500) (30,000 - 10,500)
Correct cost of goods sold $ 150,500 $ 185,500
(170,000 - 10,500 - 9,000) (175,000 + 10,500)

(1) In 2020 profit overstated by $10,500, the amount of the error in ending inventory. This error flows through to owner’s equity in 2020 to produce an overstatement of $10,500.

.

(2) In 2021 both errors have an impact. The net effect is an understatement of profit by $19,500.This is a result of the $10,500 overstatement of the beginning inventory plus $9,000 understatement of ending inventory.

.

(3) Owner’s equity in 2021 would show only an understatement of $9,000. The $10,500 overstatement of 2020 would be offset by the $10,500 understatement in profit caused by the impact on beginning inventory in 2021.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Empire Co. reported cost of goods sold as follows:      2018      2019 Beginning inventory $  ...
Empire Co. reported cost of goods sold as follows:      2018      2019 Beginning inventory $   54,000 $   64,000 Cost of goods purchased 847,000 891,000 Cost of goods available for sale 901,000 955,000 Ending inventory     64,000     55,000 Cost of goods sold $837,000 $900,000 Jim Holt, the bookkeeper, made two errors: (1) 2018 ending inventory was overstated by $3,000. (2) 2019 ending inventory was understated by $19,000. Instructions Assuming the errors had not been corrected, indicate the dollar effect...
Pharoah Company reported these income statement data for a 2-year period. 2022 2021 Sales revenue $261,700...
Pharoah Company reported these income statement data for a 2-year period. 2022 2021 Sales revenue $261,700 $202,620 Beginning inventory 40,400 30,090 Cost of goods purchased 191,760 177,910 Cost of goods available for sale 232,160 208,000 Less: Ending inventory 50,730 40,400 Cost of goods sold 181,430 167,600 Gross profit $80,270 $35,020 Pharoah Company uses a periodic inventory system. The inventories at January 1, 2021, and December 31, 2022, are correct. However, the ending inventory at December 31, 2021, is overstated by...
Burkhanov Hardware Ltd. in Tashkent, Uzbekistan reported cost of goods sold as follows. (Currency in Uzbekistan...
Burkhanov Hardware Ltd. in Tashkent, Uzbekistan reported cost of goods sold as follows. (Currency in Uzbekistan s’om, UZS) (20%)      2018                                   2019     Beginning inventory                    UZS 2,000,000                          UZS 3,000,000 Cost of goods purchased                 15,000,000                             17,500,000 Cost of goods available for sale      17,000,000                             20,500,000 Ending inventory                              (3,000,000)                             (3,500,000) Cost of goods sold                      UZS 14,000,000                    UZS 17,000,000 In 2020, the internal auditor of Burkhanov found that the company made following two errors:...
Cost of Goods sold at the Pioneer Company for Year 3 and Year 4 were as...
Cost of Goods sold at the Pioneer Company for Year 3 and Year 4 were as follows: Year 3 Year 4 Beginning inventory $ 135,000 $ 145,000 Purchases 350,000 425,000 Cost of goods available for sale 485,000 570,000 Ending inventory 145,000 150,000 Cost of goods sold $ 340,000 $ 420,000 Pioneer Company made two errors: 1) ending inventory reported at the end of Year 3 was understated by $15,000 and 2) ending inventory at the end of Year 4 was...
A company understated its ending inventory in Year 1 by $25,000 and also understated its ending...
A company understated its ending inventory in Year 1 by $25,000 and also understated its ending inventory in Year 2 by $20,000. Neither error was discovered until Year 3. As a result, of these two errors, gross profit for Year 2 was: Multiple Choice a. Overstated by $5,000. b. Understated by $45,000. c. Understated by $20,000. d. Overstated by $25,000.
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies...
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y1, Fonda incorrectly counted its inventory as $247,580 instead of the correct amount of $237,680. Enter all amounts as positive numbers. a. State the effects of the error on the December 31, 20Y1, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated / Understated Amount Inventory Overstated $ Current Assets Overstated...
Mount ValleyMount Valley Bakery reported net sales revenue of $ 37 comma 000$37,000 and cost of...
Mount ValleyMount Valley Bakery reported net sales revenue of $ 37 comma 000$37,000 and cost of goods sold of $ 11 comma 000$11,000. Compute Mount Valley'sMount Valley's correct gross profit if the company made either of the following independent accounting errors. a.  Ending merchandise inventory is overstated by $ 3 comma 000$3,000. b.  Ending merchandise inventory is understated by $ 3 comma 000$3,000. Cost of Goods Sold and Gross Profit Corrected for the Error Ending Merchandise Inventory: As Reported— (a)...
What is the impact on cost of goods sold, gross profit, net income before taxes and...
What is the impact on cost of goods sold, gross profit, net income before taxes and retained earnings, respectively, if inventory is understated? a) overstated; understated; understated; understated. b) overstated; understated; overstated; overstated. c) understated; overstated; understated; overstated. d) understated; overstated; overstated; overstated.
Powell Company had the following errors over the last two years. 2019: Ending inventory was overstated...
Powell Company had the following errors over the last two years. 2019: Ending inventory was overstated by $ 54,000 while depreciation expense was overstated by $25,400. 2020: Ending inventory was understated by $5,500 while depreciation expense was understated by $4,800. BY how much retained earning be adjusted on January 1, 2021 ( Ignore taxes)
Bramble Enterprises reported cost of goods sold for 2020 of $1,474,700 and retained earnings of $5,621,900...
Bramble Enterprises reported cost of goods sold for 2020 of $1,474,700 and retained earnings of $5,621,900 at December 31, 2020. Bramble later discovered that its ending inventories at December 31, 2019 and 2020, were overstated by $109,760 and $36,670, respectively. Determine the corrected amounts for 2020 cost of goods sold and December 31, 2020, retained earnings. Corrected cost of goods sold $enter a dollar amount Corrected 12/31/20 retained earnings $enter a dollar amount
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT