Pow Corp. accidentally overstated its 2018 ending inventory by $750. Assume that ending 2019 inventory is accurately counted. The error in 2018 will have what effect on Pow Corp.?Oa. 2018 net income is understated by $750.Ob. 2018 net income is overstated by $750.Oc. 2019 net income is understated by $750.Od. Both b and c are correct.

When an ending inventory is overstated, it decreases the value of the cost of goods and increases…

Answered: Pow Corp. accidentally overstated its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Lime Supplies had a miscount of inventory at $22,000 for the year end May 31, 2022. The correct amount should have been $25,000. If this error was never corrected, and assuming the inventory count was correct for 2023, how much would this error impact the cost of goods sold in 2022? Select one: a. Not impacted at all. b. $3,000 overstated c. $ 47,000 understated d. $3,000 understated
Required a. Compute the balance in trade accounts payable as of December 31, Year 4. b. Compute the balance in retained earnings as of December 31, Year 4. c. Compute the balance in the inventory account as of December 31, Year 4. (Assume that the level of invertory did not change from last year.) (For all requirements, negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Accounts payable 2$ 70,000 a. b. Retained earnings c. Inventory
A list of errors is shown below: Show the effects of the errors on the indicated balance sheet and income statement items. Choose 1 of the three options: Overstated, Understated, No Effect T Errors Cost of Goods Sold Retained Earnings Year-End Working Capital Ending inventory is overstated Beginning inventory is overstated Ending inventory is understated Beginning inventory is understated Purchases is overstated (recorded twice) Purchases is understated (not recorded)
What is the proper solution for this problem
What are the effects (UNDERSTATED, OVERSTATED, NO EFFECT AT ALL) of these inventory errors on (a) the current year's ASSET, LIABILITY, OWNERS EQUITY, COST OF GOODS SOLD, NET INCOME, and (b) the subsequent year's ASSET, LIABILITY, OWNERS EQUITY, COST OF GOODS SOLD, NET INCOME? Error 1. Understatement of ending inventory and understatement of purchases, but the purchase was recorded the next year. Current Year: ASSET - LIABILITY - OWNERS EQUITY - COST OF GOODS SOLD - NET INCOME - Subsequent Year: ASSET - LIABILITY - OWNERS EQUITY - COST OF GOODS SOLD - NET INCOME - Error 2. Sales of the current year recorded in the following year (corresponding goods were properly excluded from ending inventory of the current year) Current Year: ASSET - LIABILITY - OWNERS EQUITY - COST OF GOODS SOLD - NET INCOME - Subsequent Year: ASSET - LIABILITY - OWNERS EQUITY - COST OF GOODS SOLD - NET INCOME - Include some simple explanations. Thank you.
During 2021, Gamma Ltd discovered that some of their products sold during 2020 were incorrectly included in inventory as 31 December 2020 at R6 500. Assume a tax rate of 30%.Assume that the prior period error effect is considered to be material.Gamma Ltd.’s accounting records are as follows:2021 2020Sales 208 000 147 000Cost of sales (173 500) (107 000)Profit before tax 35 000 40 000Taxation (10 500) (12 000)Profit 24 500 28 000The profit for 2021 includes R13 500 for the error made in opening inventoryAdditional information:• 2020 opening retained earnings was R40 000 and closing retained earnings was R68 000.• Gamma’s income tax rate was 30% in 2021 as well as in 2020. It had no other income or expenses.• Gamma Ltd has R10 000 of share capital throughout 2020 and 2021, as well as retained earnings.REQUIRED:Disclose the effect of the error in the financial statements for the year ended 31 December 2021
What is the effect of a $51000 overstatement of last year's inventory on current years ending retained earning balance? Overstated by $51000. No effect. Understated by $51000. Need more information to determine.
2. Gabriela Company’s auditor discovered that the company inadvertently overstated ending Inventory for the prior year. If the error is not corrected, what effect will the error have on the following financial statement items for both the prior year and the current year? Indicate in each box a “+" (plus) if the item is overstated, a “-“ (minus) if the item is understated, and a “N/A" if there is no effect on the item. Prior Year Current Year Effect on Income Statement Goods Available for Sale Cost of Goods Sold Gross Profit Net Income Effect on Balance Sheet Inventory on 12/31 Retained Earnings
The 2022 and 2023 financial statements of Marigold Inc. contained the following errors: Ending Inventory Insurance Expense O 2022 $24840 understated $13640 overstated $13640 understated $30040 understated $10400 overstated 5200 understated 2023 $16640 understated Assuming that none of the errors were detected or corrected, by what amount will 2023 income before taxes be overstated or understated? 3000 overstated
What is the adjusting entry for the correction on inventory
Hh.2
Direction: Choose the correct answer.

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