P6-77B. (Learning Objective 5: Correcting inventory errors over a three-year period) The accounting records of Waterville Video

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P6-77B. (Learning Objective 5: Correcting inventory errors over a three-year period) The accounting records of Waterville Video Sales show the data betow (in millions). The shareholders are very happy with Waterville’s steady increase in net income.

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Auditors discovered that the ending inventory for 20X4 was understated by €2 million and that the ending inventory for 20X5 was also understated by €2 million. The ending inventory at December 31, 20X6, was correct.
Requirements 1. Show corrected Income Statements for each of the three years.
2. How much did these assumed corrections add to or take away from Waterville’s total net income over the three-year period? How did the corrections affect the trend of net income?
3. Will Waterville’s shareholders still be happy with the company’s trend of net income? Give the reason for your answer.

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Financial Accounting International Financial Reporting Standards Global Edition

ISBN: 9781292211145

11th Edition

Authors: Charles T. Horngren, C. William Thomas, Wendy M. Tietz, Themin Suwardy, Walter T. Harrison

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