In its physical inventory count at its February 28, 2011, year end, The Orange Sprocket Corporation included

Question:

In its physical inventory count at its February 28, 2011, year end, The Orange Sprocket Corporation included inventory that was being held for another company to sell on consignment. The merchandise was sold in the next year and inventory was correctly stated at February 29, 2012.

Instructions

Ignoring income tax, indicate the effect of this error (overstated, understated, or no effect) on the following:

(a) Cash at the end of 2011 and 2012

(b) The cost of goods sold for each of 2011 and 2012

(d) Retained earnings at the end of 2011 and 2012

(e) Ending inventory at the end of 2011 and 2012

(f) The gross profit margin for each of 2011 and 2012

(g) The inventory turnover ratio for each of 2011 and 2012

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =... Corporation
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