The accounting clerk for River’s Edge Canoe & Kayak prepared the income statement for the year ended December 31. The accounting supervisor at River’s Edge noticed that the balance of the Transportation In account was erroneously omitted from this statement. Transportation In has a balance of $562. 

Instructions 

Use the income statement shown in your working papers to answer the following questions.

1. In which section of the income statement is the account Transportation In entered?

2. How is net purchases affected by this omission (understated or overstated)? By what amount?

3. How does the omission of the Transportation In balance affect gross profit on sales? By what amount?

4. What is the correct amount for the cost of merchandise sold for the period?

5. What is the correct amount for net income?