A) Change the Ending Inventory number (cell C6 only) to 50,000 and observe how the account balances highlighted in red and/or green change (i.e. how different they are from their counterparts in Column B) and answer the following questions. Please clearly indicate whether the item is over (or understated) by circling or underlying your choice. Please also write the amount of the over (under) statement in the blank space provided.

2019 CGS is overstated (or understated) by ________________________________.

2019 Gross profit is overstated (or understated) by __________________________.

2019 Net income is overstated (or understated) by ___________________________.

2019 Retained earnings is overstated (or understated) by________________________.

2019 current assets is overstated (or understated) by ___________________________.

2019 total assets is overstated (or understated) by ___________________________.

2019 current liabilities is overstated (or understated) by ___________________________.

2019 total liabilities is overstated (or understated) by ___________________________.

2019 total stockholders equity is overstated (or understated) by ______________________.

2019 working capital is overstated (or understated) by ___________________________.

2019 current ratio is overstated (or understated) by ___________________________.

Correct El=40,000 El overstated by 10,000 El understated by 10,000 both El and purchases overstated by 10,000 both El and purchases understated by 10,000 Computation of CGS Beg. Inventory Net purchases Cost of goods available for sale less Ending Inventory Cost of goods sold (CGS) 50,000 90,000 140,000 40,000 100,000 50,000 90,000 140,000 50,000 90,000 50,000 90,000 140,000 30,000 110,000 50,000 90,000 140,000 50,000 90,000 50,000 90,000 140,000 30,000 110,000 Income Statement Sales CGS Gross Profit Less expenses Net Income 200,000 100,000 100,000 40,000 60,000 200,000 90,000 110,000 40,000 70,000 200,000 110,000 90,000 40,000 50,000 200,000 90,000 110,000 40,000 70,000 200,000 110,000 90,000 40,000 50,000 Retained Earnings Statement Beginning Retained Earnings Net income Dividends Ending Retained Earnings 20,000 60,000 10,000 70,000 20,000 70,000 10,000 80,000 20,000 50,000 10,000 60,000 20,000 70,000 10,000 80,000 20,000 50,000 10,000 60,000 Correct El=40,000 El overstated by 10,000 El understated by 10,000 both El and purchases overstated by 10,000 both El and purchases understated by 10,000 Computation of CGS Beg. Inventory Net purchases Cost of goods available for sale less Ending Inventory Cost of goods sold (CGS) 50,000 90,000 140,000 40,000 100,000 50,000 90,000 140,000 50,000 90,000 50,000 90,000 140,000 30,000 110,000 50,000 90,000 140,000 50,000 90,000 50,000 90,000 140,000 30,000 110,000 Income Statement Sales CGS Gross Profit Less expenses Net Income 200,000 100,000 100,000 40,000 60,000 200,000 90,000 110,000 40,000 70,000 200,000 110,000 90,000 40,000 50,000 200,000 90,000 110,000 40,000 70,000 200,000 110,000 90,000 40,000 50,000 Retained Earnings Statement Beginning Retained Earnings Net income Dividends Ending Retained Earnings 20,000 60,000 10,000 70,000 20,000 70,000 10,000 80,000 20,000 50,000 10,000 60,000 20,000 70,000 10,000 80,000 20,000 50,000 10,000 60,000