A retailer completed a physical count of ending merchandise inventory. When counting inventory, employees did not include $3,000 of incoming goods shipped by a supplier on December 31 under FOB shipping point. These goods had been recorded in Merchandise Inventory, but they were not included in the physical count because they were in transit. This means shrinkage was incorrectly overstated by $3,000. Compute the amount of overstatement or understatement for each of the following amounts for this period. a. Ending inventory b. Total assets c. Net income d. Total equity

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?

A retail company recently completed a physical count of ending merchandise inventory to use in preparing adjusting entries. In determining the cost of the counted inventory, company employees failed to consider that $3.000 of ineoming goods had been shipped by a supplier on December 31 under an FOB shipping point agreement. These goods had been recorded in Merchandise Inventory as a purchase, but rhey were nor included in the physical count because they were in transit. a. Explain how this overlooked fact impacts the company's balance sheet and income statement. b. Indicate whether this overlooked fact results in an overstatement. understatement, or no effect on the following separate ratios: return on assets, debt ratico. current ratio, and acid-test ratio. Exercise 5-12 Interpreting a physical count error as inventory shrinkage A1 CS Scanned with CamScanner