Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 6, Problem 7QC
At December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error affect cost of goods sold and net income for 2018?
Learning Objective 5
- Overstates cost of goods sold and understates net income
- Understates cost of goods sold and overstates net income
- Leaves both cost of goods sold and net income correct because the errors cancel each other
- Overstates both cost of goods sold and net income
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At December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error affect cost of goods sold and net income for 2018?
a. Overstates cost of goods sold and understates net income
b. Understates cost of goods sold and overstates net income
c. Leaves both cost of goods sold and net income correct because the errors cancel each other
d. Overstates both cost of goods sold and net income
If ending inventory is understaffed for year 1, then in year 2….
A. Costa of goods sold and gross profit will both be overstated
B. Costs of goods sold and gross profit will be understated
C. Costs of goods sold will be overstated and gross profit will be understated
D. Costs of food sold will be understated and gross profit will be overstated
On December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error affect the cost of goods sold and net income for 2018?
Overstates cost of goods sold and understates net income
Understates cost of goods sold and overstates net income
Leaves both cost of goods sold and net income correct because the errors cancel each other
Overstates both cost of goods sold and net income
Chapter 6 Solutions
Horngren's Accounting (12th Edition)
Ch. 6 - Which principle or concept states that business...Ch. 6 - Which inventory costing method assigns to ending...Ch. 6 - Assume Nile.com began April with 14 units of...Ch. 6 - Suppose Nile.com used the weighted-average...Ch. 6 - Which inventory costing method results in the...Ch. 6 - Which of the following is most closely linked to...Ch. 6 - At December 31, 2018, Stevenson Company overstated...Ch. 6 - Suppose Maestro’s had cost of goods sold during...Ch. 6 - Suppose used the LIFO inventory costing method and...Ch. 6 - Prob. 1RQ
Ch. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Discuss some measures that should be taken to...Ch. 6 - Under a perpetual inventory system, what are the...Ch. 6 - When using a perpetual inventory system and the...Ch. 6 - During periods of rising costs, which inventory...Ch. 6 - What does the lower-of-cost-or market (LCM) rule...Ch. 6 - What account is debited when recording the...Ch. 6 - What is the effect on cost of goods sold, gross...Ch. 6 - When does an inventory error cancel out, and why?Ch. 6 - How is inventory turnover calculated, and what it...Ch. 6 - How is days’ sales inventory calculated, and what...Ch. 6 - When using the periodic inventory system, which...Ch. 6 - When using periodic inventory system and...Ch. 6 - Determining inventory accounting principles...Ch. 6 - Determining inventory costing methods Learning...Ch. 6 - Preparing a perpetual Inventory record and journal...Ch. 6 - Preparing a perpetual inventor, record and journal...Ch. 6 - Preparing a perpetual inventor record and journal...Ch. 6 - Preparing a perpetual inventory record and journal...Ch. 6 - Comparing Cost of Goods Sold under FIFO, LIFO, and...Ch. 6 - Applying the lower-of-cost-or-market rule Learning...Ch. 6 - Determining the effect of an inventory error...Ch. 6 - Computing the rate of inventory turnover and days’...Ch. 6 - Computing periodic inventory amounts—FIFO Learning...Ch. 6 - Computing periodic inventory amounts—LIFO Learning...Ch. 6 - Computing periodic inventory...Ch. 6 - Using accounting vocabulary Learning Objective 1,...Ch. 6 - Comparing inventory methods Learning Objective 2...Ch. 6 - Measuring and journalizing merchandise inventory...Ch. 6 - Measuring and journalizing merchandise inventory...Ch. 6 - Measuring ending inventory and cost of goods sold...Ch. 6 - Comparing amounts for cost of goods sold, ending...Ch. 6 - Comparing cost of goods sold and gross...Ch. 6 - Applying the lower-of-cost-or-market rule to...Ch. 6 - Applying the lower-of-cost-or-market rule to...Ch. 6 - Measuring the effect of an inventory error...Ch. 6 - Correcting an inventory error-two years Learning...Ch. 6 - Computing inventory turnover and days’ sales in...Ch. 6 - Comparing ending merchandise inventory, cost of...Ch. 6 - Computing periodic inventory amounts Learning...Ch. 6 - Accounting for inventory using the perpetual...Ch. 6 - Accounting for inventory using the perpetual...Ch. 6 - Accounting principles for inventory and applying...Ch. 6 - Prob. P6.31APGACh. 6 - Prob. P6A.32APGACh. 6 - Prob. P6.33BPGBCh. 6 - Prob. P6.34BPGBCh. 6 - Accounting principles for inventory and applying...Ch. 6 - Prob. P6.36BPGBCh. 6 - Prob. P6A.37BPGBCh. 6 - Prob. P6.38CTCh. 6 - Prob. P6.39CPCh. 6 - Prob. P6.40PSCh. 6 - Prob. 1CPCh. 6 - Prob. 2CPCh. 6 - Prob. 3CPCh. 6 - Prob. 4CPCh. 6 - Prob. 5CPCh. 6 - Prob. 6CPCh. 6 - Prob. 7CPCh. 6 - Prob. 8CPCh. 6 - Prob. 9CPCh. 6 - Prob. 10CPCh. 6 - Prob. 11CPCh. 6 - Prob. 6.1TIATCCh. 6 - Prob. 6.1DCCh. 6 - Prob. 6.1FSC
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- 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?arrow_forwardIf ending inventory is understated by $25,000, what effect will this have on cost of goods sold and net income? a.Cost of goods sold is overstated by $25,000, and net income is understated by $25,000. b.Cost of goods sold is understated by $25,000, and net income is understated by $25,000. c.Cost of goods sold is understated by $25,000, and net income is overstated by $25,000. d.Cost of goods sold is overstated by $25,000, and net income is overstated by $25,000.arrow_forwardyears ended June 30, 2019 and 2018: Cost of Goods Available for Sale Nature Foods Grocery reported the following comparative income statements for the Beginning Merchandise Inventory Less: Ending Merchandise Inventory During 2019, Nature Foods Grocery discovered that ending 2018 merchandise inven- inventory error-two years an Merchandise Inventory 361 Learning Objective 5 1.2019, NI $36,500 NATURE FOODS GROCERY Income Statements Years Ended June 30, 2019 and 2018 2019 Net Sales Revenue Cost of Goods Sold: 2018 $ 134,000 $ 119,000 $ 17,000 78,000 $ 14,000 67,000 81,000 Net Cost of Purchases 95,000 18,000 17,000 Cost of Goods Sold 77,000 64,000 57,000 Gross Profit 55,000 Operating Expenses 26,000 21,000 $ 31,000 Net Income $ 34,000 tory was overstated by $5,500. Requirements 1. Prepare corrected income statements for the two years. 2. 2 State whether each year's net income-before your corrections-is understated or overstated, and indicate the amount of the understatement or…arrow_forward
- Problem 10 Indicate the effects of the following errors on cost of goods sold and net income. 1. Beginning inventory is understated by $10,000. 2. Ending inventory is overstated by $25,000. 3. Beginning inventory is overstated by $30,000 and ending inventory is understated by $10,000. nsidov 4. Ending inventory is understated by $5,000 and beginning inventory is understated by $5,000.arrow_forwardSheridan Hardware reported cost of goods sold as follows. Beginning inventory Cost of goods purchased Cost of goods available for sale Less: Ending inventory Cost of goods sold 2022 Cost of goods sold $ $ 30,500 189,500 220,000 40,000 $180,000 Sheridan made two errors: 1.2021 ending inventory was overstated by $3,200. 2.2022 ending inventory was understated by $6,300. Compute the correct cost of goods sold for each year. 2022 2021 $ 25,000 153,500 178,500 30,500 $148,000 $ 2021arrow_forwardMarigold Hardware reported cost of goods sold as follows. Beginning inventory Cost of goods purchased Cost of goods available for sale Less: Ending inventory Cost of goods sold Cost of goods sold $ 2022 $ 30,500 185,500 eTextbook and Media 216,000 38,500 $177,500 2021 $ 23,500 2022 154,500 Marigold made two errors: 1.2021 ending inventory was overstated by $3,400. 2.2022 ending inventory was understated by $6,300. Compute the correct cost of goods sold for each year. 178,000 30,500 $147,500 $ 2021arrow_forward
- Partial income statements for Sherwood Company summarized for a four-year period show the following: 2018 2019 2020 2021 $ 2,300,000 1,472,000 $ 2,700,000 1,701,000 $ 2,800,000 1,820,000 $ 3,300,000 2,112,000 Net Sales Cost of Goods Sold Gross Profit $ 828,000 $ 999,000 $ 980,000 $ 1,188,000 An audit revealed that in determining these amounts, the ending inventory for 2019 was overstated by $21,200. The inventory balance on December 31, 2020, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. 2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. 2-b. Do the results lend confidence to your corrected amounts?arrow_forwardIf beginning inventory is understated by $15,000, the effect of this error in the current period is Cost of Goods Sold Net Income Understated Overstated Overstated Understated Overstated Overstated Understated Understatedarrow_forwardAssuming a companys year-end inventory were overstated by $5,000, indicate the effect (overstated/understated/no effect) of the error on the following balance sheet and income statement accounts. A. Income Statement: Cost of Goods Sold B. Income Statement: Net Income C. Balance Sheet: Assets D. Balance Sheet: Liabilities E. Balance Sheet: Equityarrow_forward
- Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements presented below for 2019 and 2018. During 2020, Waymires accountant discovered that ending inventory for 2018 had been understated by $6,500. Required: 1. Prepare corrected income statements for 2019 and 2018. 2. Prepare a schedule showing each financial statement item affected by the error and the amount of the error for that item (ignore the effect of income taxes). Indicate whether each error is an overstatement (+) or an understatement (-).arrow_forwardLO1 If the ending inventory is overstated by 10,000, indicate what, if anything, is incorrect about the following: Cost of goods sold___________ Gross profit___________ Net income___________ Ending owners capital___________arrow_forwardMalcolm Lee Industries reported the following amounts in its December 31st financial statements: 2020 2021 Cost of Goods sold $270,100 $288,600 Ending Inventory 55,600 55,600 Errors were made in each year as follows: in 2020, ending inventory was overstated by $10,600 while in 2021, ending inventory was understated by $6,600. Explain the impact of these errors for 2021 profit and owners’ equity. Profits will be by $ . Owners’ equity will be by $ . Save for Later Last saved 1 day ago. Saved work will be auto-submitted on the due date. Attempts: 0 of 1 used Submit Answerarrow_forward
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