Dexons Ltd reported these data (adapted; amounts in billions):

Assume that in early 20x9, an error was discovered which involved the closing inventory for 20x6 being overstated by €1 billion and the closing inventory for 20x7 being understated by €1 billion. The closing inventory at year-end 20x8 was correct.
Requie:
1. Incorporate the above information and show corrected statements of profit or loss for the three years.
2. Discuss whether each year’s net profit as reported above and the related owners’ equity amounts at the end of the year were understated or overstated. For each incorrect figure, indicate the amount of the understatement or overstatement.
3. How much did these assumed corrections add or take away from the Dexons total net profit over the three-year period?
How did the corrections affect the trend of net profit?

Transcribed Image Text:

20x8 20x7 20x6 Net sales revenue 37 34 31 Cost of goods sold: Opening inventory. 4 3 2 Purchases... 25 24 22 Cost of goods available... Less closing inventory.... (4) Cost of goods sold Gross profit.......... Total operating expenses. Net profit... 29 27 24 (4) (3) 12 10 2 al= 9-2 23 21 11 10 2 2 812