Contrast the effects that LIFO vs. FIFO would have on ending inventory, net income and cash flow in a period in which prices are rising? Assume that in 2021, Graham Company discovered that December 31, 2019 inventory was overstated. Discuss the impact that this error would have had on 2019 net income, 2020 net income and the combined net income of the two years.

Contrast the effects that LIFO vs. FIFO would have on ending inventory, net income and cash flow in a period in which prices are rising? Assume that in 2021, Graham Company discovered that December 31, 2019 inventory was overstated. Discuss the impact that this error would have had on 2019 net income, 2020 net income and the combined net income of the two years.

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...

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If Barcelona Companys ending inventory was actually $122,000, but the cost of consigned goods, with a cost value of $20,000 were accidentally included with the company assets, when making the year-end inventory adjustment, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?
For each of the following inventory errors occurring in 2021, determine the effect of the error on 2021's cost of goods sold, net income, and retained earnings using understated (U), overstated (O), or no effect (NE). Assume that the error is not discovered until 2022 and that a periodic inventory system is used. Ignore income taxes. Cost of Goods Sold Retained Net Income Earnings 1. Overstatement of ending inventory U 2. Overstatement of purchases 3. Understatement of beginning inventory 4. Freight-in charges are understated 5 Understatement of ending inventory 6. Understatement of purchases 7. of beginning inventory 8. Understatement of purchases plus understatement of ending inventory by the same amount
Assume that in 2021, Graham Company discovered that December 31, 2019 inventory was overstated. Discuss the impact that this error would have had on 2019 net income, 2020 net income and the combined net income of the two years.
Several errors are listed below. Indicate the effect each error would have on 2020 net income by selecting a plus sign (+), minus sign (-) or NI (no impact). Part (a) has been completed as an example. Effect on 2020Net Income a. Failed to record a 2020 expense. + b. Ending 2019 inventory is understated. c. Ending 2020 accrued expense is overstated. d. Ending 2020 inventory is overstated. e. Ending 2019 accrued revenue is understated. f. Ending 2020 prepaid expense is overstated. g. Ending 2019 unearned revenue is overstated. h. Ending 2020 accrued revenue was overstated. i. Ending 2019 prepaid expense was overstated. j. Ending 2019 accrued expense is overstated. k. Ending 2020 unearned revenue is understated.
For each of the following independent scenarios, indicate the effect of the error (if any) on: i. 2019 net income; ii. 2020 net income; and iii. 2020 closing retained earnings. company uses the periodic system of inventory and its fiscal year-end is December 31. Ignore income tax effects. Consider each of the following independent The scenarios: a. Your analysis of inventory indicates that inventory at the end of 2019 was overstated by $27,000 due to an inventory count error. Inventory at the end of 20 13 was correctly stated. b. Invoices in the amount of $107,000 for inventory received in December 2019 were not entered on the books in 2019. They were recorded as purchases in January 2020 when they were paid. The goods were counted in the 2019 inventory count and included in ending inventory on the 2019 financial statements. c. Goods received on consignment amounting to $89,000 were included in the physical count of goods at the end of 2020 and included in ending inventory on the 2020…
Vader Corporation made two errors in counting inventory: Ending inventory for 2019 was overstated by $15,000, and ending inventory for 2020 was understated by $12,000. If neither error was corrected, what will be the error (before taxes) in 2020 net income? a.Overstated $27,000. b.Understated $27,000. c.Overstated $3,000. d.Understated $3,000.
If merchandise inventory is understated at the end of 2020, and the error is not discovered, how will net income be affected in 2021?
Green Trifle Bakery discovered some errors for 2020 and 2021. What would be the impact on net income for each year if the errors were left undetected? Error Ending inventory in 2020 was overstated, but correctly counted in 2021. Depreciation expense was incorrectly calculated in 2020, resulting in $1,000 of Rent expense for 2020 was not accrued, and incorrectly [Select] recorded as an expense when paid in 2021. additional expense recorded. It was correctly calculated in 2021. Subscription revenue for 2021 was incorrectly recorded as revenue when it was received in 2020. 2020 Sales on accounts were not recorded when made in 2020, and recorded in 2021 when cash was received. [Select] [Select] [Select] [Select] V <
A large decrease in end of year grain inventory from one year to the next mistakenly left off of the 2021 accrual income statement will make 2021 net income appear: a. Lower than it really is b. As a true reflection of 2021 financial performance c. Higher than it really is d. None of the above
If ending inventory is overstated in the current fiscal year, what effect will this have on net income for the next fiscal year? a.Net income would be understated. b.Net income would only be affected in the current fiscal year, and it would be understated. c.There would be no effect on net income. d.Net income would be overstated.
McLelland Inc. reported net income of $150,000 for 2019 and $165,000 for 2020. Early in 2020, McLelland discovers that the December 31, 2019 ending inventory was overstated by $7,700. For simplicity, ignore taxes. Required: 1. What is the correct net income for 2019? For 2020? Net Income 2019 2020 2. Assuming the error was not corrected, what is the effect on the balance sheet at December 31, 2019? At December 31, 2020? December 31, 2019 December 31, 2020
In 2019, ending inventory is overstated. What is the effect of the error on net income in 2019 and 2020? A. Net income is understated in 2019 and 2020. B. Net income is understated in 2019 and overstated in 2020. C. Net income is overstated in 2019 and understated in 2020. D. Net income is overstated in 2019 and 2020.