Question

Swifty Limited has a calendar-year accounting period. The following errors were discovered in 2020.

1.		The December 31, 2018 merchandise inventory had been understated by $51,800.
2.		Merchandise purchased on account in 2019 was recorded on the books for the first time in February 2020, when the original invoice for the correct amount of $3,100 arrived. The merchandise had arrived on December 28, 2019, and was included in the December 31, 2019 merchandise inventory. The invoice arrived late because of a mix-up by the wholesaler.
3.		Inventory, valued at $1,000, held on consignment by Swifty was included in the December 31, 2019 count.

Calculate the effect of each error on the 2019 net income. (Do not leave any answer field blank. Enter 0 for amounts.)

1.		Net income/(loss) for 2019 is select an effect (no effect/overstated/understated) by $................. dollar amount
2.		Net income/(loss) for 2019 is select an effect (no effect/overstated/understated) by $..........a dollar amount
3.		Net income/(loss) is select an effect (no effect/overstated/understated) by $............a dollar amount

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Calculate the effect, if any, that each error had on the related December 31, 2019 statement of financial position items. (Do not leave any answer field blank. Enter 0 for amounts.)

1.		Inventory is select ( no effect/overstated/understated), by ....................a dollar amount
2.		Accounts payable is select an effect (no effect/overstated/understated), retained earnings is select an effect(no effect/overstated/understated), .............. a dollar amount
3./		Inventory is select an effect(no effect/overstated/understated )by ................a dollar amount  and retained earnings are select (no effectoverstatedunderstated), .........a dollar amount

Answer 1