Assume that Volleyball Pro Equipment had $900,000 of sales during each of three consecutive years, and it
Question:
Assume that Volleyball Pro Equipment had $900,000 of sales during each of three consecutive years, and it purchased merchandise costing $500,000 during each of the years. It also maintained a $200,000 inventory from the beginning to the end of the three-year period. However, it made an error at the end of the first year, 2017, that caused its ending 2017 inventory to appear on its statements at $180,000 rather than the correct $200,000.
Required
1. Calculate the actual amount of the company’s gross profit in each of the years.
2. Prepare a comparative income statement like Exhibit 6.12 (or Exhibit 6A.6) to show the effect of this error on the company’s cost of goods sold and gross profit in 2017, 2018, and 2019.
Step by Step Answer:
Fundamental Accounting Principles Volume 1
ISBN: 9781259259807
15th Canadian Edition
Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann