A firm recorded it's ending inventory for the previous year at $40,000. It realized at the end of the first quarter of the current year that the number was misstated and should actually be $30,000. What corrective entries need to occur to ensure net income is not affected at the end of the current year? There are no corrections to be made. The firm should account for the misstated inventory in a separate cost of goods sold entry. There is no way to fix the entry and the net income will remain affected. The firm should account for the misstated inventory at the end of the current year.

A firm recorded it's ending inventory for the previous year at $40,000. It realized at the end of the first quarter of the current year that the number was misstated and should actually be $30,000. What corrective entries need to occur to ensure net income is not affected at the end of the current year? There are no corrections to be made. The firm should account for the misstated inventory in a separate cost of goods sold entry. There is no way to fix the entry and the net income will remain affected. The firm should account for the misstated inventory at the end of the current year.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 14EB: If Barcelona Companys ending inventory was actually $122,000, but the cost of consigned goods, with...

See similar textbooks

Similar questions

If Wakowski Companys ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?
Company Elmira reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 32,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
Bhushan Company has been using LIFO for inventory purposes because it would prefer to keep gross profits low for tax purposes. In its second year of operation (20-2), the controller pointed out that this strategy did not appear to work and suggested that FIFO cost of goods sold would have been higher than LIFO cost of goods sold for 20-2. Is this possible? REQUIRED Using the information provided, compute the cost of goods sold for 20-1 and 20-2 comparing the LIFO and FIFO methods.
Redford Company hired a new store manager in October 2021, who determined the ending inventory on December 31, 2021, to be $66,000. In March, 2022, the company discovered that the December 31, 2021 ending inventory should have been $75,600. The December 31, 2022, inventory was correct. (Assume that the errors were not corrected until after 2022.) Ignore income taxes. Required: Complete the following table to show the effects of the inventory error on the four amounts listed. Give the amount of the discrepancy and indicate whether it was overstated, understated or no effect. Year 2021 2022 Ending Inventory 9,600 Understated Cost of Goods Sold Net Income
Candle Co. performs an inventory court at year - end. The company records a ending balance of $56,000 for inventory on its balance sheet. During the following year, the accountant discovers that the ending inventory was miscounted, causing ending inventory to be overstated by $2, 500. a. What is the effect of the misstatement on the income statement? b. Besides ending inventory, what was the effect of the error on the balance sheet?
The Mike Tomlin Company has a calendar-year accounting period. The following error was discovered in April of 2019. This error would have affected the financial statements for 2017 and 2018. The ending balance in the inventory had been overstated at 12/31/2017 by $100,000. INSTRUCTIONS: Compute the effect this error had on the 2017 net income. Compute the effect, if any, each error had on the December 31, 2017 balance sheet items. Hint: be very careful about the time period!
Bramble Decor did not have a good year, and top management is under pressure to boost reported income. According to its records, the inventory balance at year-end was $735,000. However, the following information was not considered when determining that amount.Prepare a schedule to determine the correct inventory amount. (If an amount reduces the account balance then enter with a negative sign preceding the number , e.g. -15,000, or parenthesis e.g. (15,000). Enter 0 if there is no effect.) Ending inventory-as reported $enter a dollar amount 1. Included in the company’s count were goods with a cost of $252,000 that the company is holding on consignment. The goods belong to Kroeger Company. enter a dollar amount 2. The physical count did not include goods purchased by Bramble with a cost of $42,000 that were shipped FOB destination on December 28 and did not arrive at Bramble warehouse until January 3. enter a dollar amount…
Kari Downs, an auditor with Wheeler CPAS, is performing a review of Waterway Company's inventory account. Waterway did not have a good year, and top management is under pressure to boost reported income. According to its records, the inventory balance at year- end was $747,000. However, the following information was not considered when determining that amount. (a1) Prepare a schedule to determine the correct inventory amount. (If an amount reduces the account balance then enter with a negative sign preceding the number, e.g. -15,000, or parenthesis e.g. (15,000). Enter O if there is no effect.) 1. 2. 3. 4. 5. 6. Ending inventory-as reported Included in the company's count were goods with a cost of $257,000 that the company is holding on consignment. The goods belong to Kroeger Corporation. The physical count did not include goods purchased by Waterway with a cost of $35,000 that were shipped FOB destination on December 28 and did not arrive at Waterway warehouse until January 3.…
If Soda Popinski's Company's ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?
CARDO Company suspects that there is missing inventory in its warehouse at December 31, 2021. All sales and purchases were made on account. Also, the gross profit rate based on net sales is consistent every year. To aid in your investigation, you obtained the following: How much is the cost of sales based on the historical gross profit rate?
In 2007, after the 20X6 annual financial statements had been issued, Marcella Stores Inc. discovered that a significant transposition error had been made in recording the ending inventory for 20X6. The inventory had been recorded as $5,260,000 when it should have been $2,560,000. The average income tax rate is 30%. Required: 1. This part of the question is not part of your Connect assignment. 2. Prepare any journal entries that would be necessary in 20X7 to correct this error. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 Record the entry to ajdust the error in inventory.
Assume that the ending inventory of a merchandising firm is overstated by $40,000. a. By how much and in what direction (overstated or understated) will the firms cost of goods be misstated? b. If this error is not corrected, what effect will it have on the subsequent period's operating income? c. If this error is not corrected, what effect will it have on the total operating income of the two periods (the period in which there is an error and the subsequent period) combined?