Question

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 that the errors had on the items appearing on the financial statements listed below. Also indicate if the amounts are overstated (O) or understated (U).

		2018				2019
			Overstated/				Over/
	Amount		Understated		Amount		Under
Total assets	$_________			_______	$_________			_______
Stockholder's equity	$_________			_______	$_________			_______
Cost of goods sold	$_________			_______	$_________			_______
Net income	$_________			_______	$_________			_______

Answer 1