Answered: 2 by reducing the reported ending…

2 by reducing the reported ending inventory in both Year 1 and Year 2 by $77,000. Which of the following statements is correct for Year 27

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 59E: Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements...

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Question

A company overstated its ending inventory in Year 1 by $77,000. The error was not discovered until Year 3. No errors
were made in Year 2. After finding the error in Year 3, management provides restated balance sheets for Year 1 and Year
2 by reducing the reported ending inventory in both Year 1 and Year 2 by $77,000. Which of the following statements is
correct for Year 2?
Multiple Choice
No adjustments to the amounts reported for inventory or retained earnings are needed in Year 2.
The amount reported for inventory in Year 2 needs to be increased by $77,000, and the amount
reported for retained earnings in Year 2 needs to be decreased by $77,000.

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