Question

The net income per books of Donna Clark Company was determined without knowledge of the errors indicated below.

Year		Net Income per Books				Error in Ending Inventory
2015			$54,600			Overstated		$ 3,210
2016			56,400			Overstated		9,100
2017			58,560			Understated		10,430
2018			60,500			No error
2019			62,450			Understated		2,080
2020			64,480			Overstated		8,520

Prepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventory errors.

Errors in Inventories
Year		Net Income Per Books		Overstatement Jan. 1		Understatement Jan. 1		Overstatement Dec. 31		Understatement Dec. 31		Corrected Net Income
2015		$54,600		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
2016		56,400		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
2017		58,560		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
2018		60,500		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
2019		62,450		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
2020		64,480		enter a dollar amount

Answer 1

Year	Net Income Per Book (Given)	Overstatement Jan 1	Understatement Jan 1	Overstatement Dec 31	Understatement Dec 31	Adjusted Net Income Figure
	A	B	C	D	E	(A+B-C-D+E)
2015	$54,600	0	0	$3,210	0	$51,390
2016	$56,400	$3,210	0	$9,100	0	$50,510
2017	$58,560	$9,100	0	0	$10,430	$78,090
2018	$60,500	0	$10,430	0	0	$50,070
2019	$62,450	0	0	0	$2,080	$64,530
2020	$64,480	0	$2,080	$8,520	0	$53,880

Closing Inventory of a year becomes opening inventory of the next year, the same applies to under/over statements.
Eg. Overstatement in closing inventory in 2015 of $3,210 would also lead to Overstatement of Opening Inventory in 2016 by $3,210