Question

Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements presented below...

Effects of an Error in Ending Inventory

Waymire Company prepared the partial income statements presented below for 2019 and 2018.

2019 2018
Sales revenue $538,200 $483,700
Cost of goods sold:
Beginning inventory $39,300 $32,100
Purchases 343,200 292,700
Cost of goods available for sale 382,500 324,800
Ending inventory (46,800) 335,700 (39,300) 285,500
Gross margin $202,500 $198,200
Operating expenses (167,200) (151,600)
Income before taxes $35,300 $46,600

During 2020, Waymire's accountant discovered that ending inventory for 2018 had been understated by $6,500.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

When ending inventory for 2018 is understated by $6500 then 2018 Cost of goods sold is overstated by $6500 and 2018 income before tax is understated by $6500.

2019 Beginning inventory is understated and Cost of good sold is also understated and net income is overstated.

2019 2018
Sales 538200 483700
Cost of goods sold
Beginning inventory 45800 32100
Purchases 343200 292700
Cost of goods available for sale 389000 324800
Less: Ending inventory -46800 342200 -45800 279000
Gross margin 196000 204700
Operating expense 167200 151600
Income before taxes 28800 53100
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
PA7-5 (Supplement 7B) Analyzing and Interpreting the Effects of Inventory Errors [LO 7-S2] Partial income statements...
PA7-5 (Supplement 7B) Analyzing and Interpreting the Effects of Inventory Errors [LO 7-S2] Partial income statements for Sherwood Company summarized for a four-year period show the following: 2015 2016 2017 2018 Net Sales $ 2,400,000 $ 2,800,000 $ 2,900,000 $ 3,400,000 Cost of Goods Sold 1,584,000 1,820,000 1,943,000 2,244,000 Gross Profit $ 816,000 $ 980,000 $ 957,000 $ 1,156,000 An audit revealed that in determining these amounts, the ending inventory for 2016 was overstated by $24,000. The inventory balance on...
Dallas Corporation prepared the following two income statements: First Quarter Second Quarter Sales Revenue $ 21,000...
Dallas Corporation prepared the following two income statements: First Quarter Second Quarter Sales Revenue $ 21,000 $ 25,200 Cost of Goods Sold Beginning Inventory $ 4,200 $ 5,200 Purchases 8,200 13,200 Goods Available for Sale 12,400 18,400 Ending Inventory 5,200 10,200 Cost of Goods Sold 7,200 8,200 Gross Profit 13,800 17,000 Operating Expenses 6,200 7,200 Income from Operations $ 7,600 $ 9,800 During the third quarter, the company’s internal auditors discovered that the ending inventory for the first quarter should...
Mondetta Clothing prepared its annual financial statements dated December 31. The company used the FIFO inventory...
Mondetta Clothing prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows: Net Sales $ 440,000 Cost of Goods Sold Beginning Inventory $ 50,000 Purchases 283,000 Goods Available for Sale 333,000 Ending Inventory (FIFO cost) 99,600 Cost of Goods Sold 233,400 Gross Profit 206,600 Operating Expenses 98,000 Income from Operations 108,600 Income Tax Expense (30%) 32,580 Net Income $...
The 2020 inventory data for Garden Corporation’s patio furniture Bermuda set is presented below. Assume that...
The 2020 inventory data for Garden Corporation’s patio furniture Bermuda set is presented below. Assume that Garden uses periodic inventory tracking. 2020 Beginning Inventory (purchased in 2019) 50 units @ $280 per unit Purchases: Purchase 1 on 1/20/20 150 units @ $300 per unit Purchase 2 on 6/15/20 600 units @ $320 per unit     Sales: Sale 1 on 4/8/20 275 units @ $600 per unit Sale 2 on 9/25/20 430 units @ $600 per unit When Garden examines the...
Finch Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory...
Finch Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Finch’s policy is to maintain an ending inventory balance equal to 15 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $76,000. Required Complete the inventory purchases budget by filling in the missing amounts. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement. Determine...
Presented below are income statements prepared on a LIFO and FIFO basis for Martinez Company, which...
Presented below are income statements prepared on a LIFO and FIFO basis for Martinez Company, which started operations on January 1, 2016. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2017. The FIFO income statement is computed in accordance with the requirements of GAAP. Martinez’s profit-sharing agreement with its employees indicates that the company will pay employees 10% of income before profit-sharing. Income taxes are ignored. LIFO...
Presented below is information related to Oriole Company for the month of January 2019. Ending inventory...
Presented below is information related to Oriole Company for the month of January 2019. Ending inventory per perpetual records $24,070 Insurance expense $12,770 Rent expense 24,210 Ending inventory actually on hand 23,170 Salaries and wages expense 55,850 Sales discounts 12,430 Cost of goods sold 223,370 Sales returns and allowances 14,630 Freight-out 7,030 Sales revenue 416,910 a. Prepare the necessary adjusting entry for inventory. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry...
) Presented below is information related to Chesterton Corp for the year ended     December 31,...
) Presented below is information related to Chesterton Corp for the year ended     December 31, 2019. Purchases $200,000 Purchase discounts 3,000 Purchase returns & allowances 6,000 Sales revenue 312,000 Sales discounts 8,000 Sales returns & allowances 13,000 Freight-in 10,000 Freight-out 5,000 Inventory, January 1, 2019 42,000 Inventory, Dec. 31, 2019 63,000 Instructions: Prepare a partial income statement through gross profit, including a detailed cost of goods sold section assuming that Chesterton uses a periodic inventory system. Record the entry...
The income statement and a partial balance sheet for Jefferson Company is presented below. Prepare the...
The income statement and a partial balance sheet for Jefferson Company is presented below. Prepare the operating activities section of the statement of cash flows using the indirect method. Jefferson Company                                                            Income Statement                                       For the Year Ended December 31, 2006 Sales                                                                                                                              $500,000 Cost of goods sold                                                                                                  390,000 Gross profit                                                                                                                $110,000 Operating expenses:         Salaries                                                                          $70,000         Depreciation expense                                                 20,000         Miscellaneous                                                             10,000                        100,000 Net income                                                                                                                   $10,000                                                          Jefferson Company                                                         Partial Balance Sheet                                                           December 31,...
Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory...
Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory using the LIFO inventory costing method but did not compare the cost of its ending inventory to its market value (replacement cost). The preliminary income statement follows: Sales Revenue $ 128,000 Cost of Goods Sold Beginning Inventory $ 12,000 Purchases 85,000 Goods Available for Sale 97,000 Ending Inventory 21,800 Cost of Goods Sold 75,200 Gross Profit 52,800 Operating Expenses 28,000 Income from Operations 24,800...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT