Question
1.If the beginning merchandise inventory was understated $8,000 in 2014, purchases were overstated $6,000 in 2014 and the ending merchandise inventory was overstated $10,000 in
1.If the beginning merchandise inventory was understated $8,000 in 2014, purchases were overstated $6,000 in 2014 and the ending merchandise inventory was overstated $10,000 in 2015. Assume that no corrections were made during 2014 or 2015. All other items in the income statement were correct.
1)What affect does this have on the cost of goods sold and net income for 2014 in dollar amounts and whether it's understated or overstated?
2)What affect does this have on net income and retained earnings in dollar amounts and whether it's understated or overstated for 2015?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started