Background:The Mason family operates a building supply store and counts the physical inventory once a year. The value assigned to the year-end inventory was $35 000. They failed to count the inventory on four shelves in the warehouse. As a result, the year-end financial statements were prepared with an incorrect valuation for ending inventory. A couple of weeks after the statements were prepared, the omission was discovered and reported to the company's accountant. The value of the inventory missed was $7 500.

1. Required: Create mini-income statement including the incorrect ending inventory on thespreadsheet provided.Net sales for the period were $325 000; beginning inventory was $65 000; purchases were $24 000; and operating expenses were $161 000.
2. Create revised income statement with the correct ending inventory figure.
3. Evaluate the effect of the omission on each of the following:

a ,cost of goods sold

b gross profit

c net income

d the balance sheet

4.Assume the accountant did NOT correct the error this year, and she permitted this error to be carried forward to the next accounting year. What would be the effect of this error on next year's:

1. income statement?
2. balance sheet?

O O . U3A2 Assignment1 iEvl114%v i T ii I i'vi i 1175/- l' ' , t L - A 135 MD}: M, + Sheet'l Unit 3 Activity 2 Assignment 1 Part 1: With inventory error Mason Bulldlng Sugplle Income statement State effect as: overstated, understated, 0R no eff: For the Year ended Deeemher 31, 2015 Part 3 Effect of the omission on: Effect Amount Net sales a. the cost of goods sold b. gross prot Cost of Goods Sold 0. net income 55\" I\"; Inventory. January 1 d. the balance sheet Purchases total assets llll'J ll' Cost of Goods Available for Sale owner's equity Inventory. December 31 Cost of Goods Sold Part 4 Gross Profit a. income statement accounts beginning inventory Operating Expenses the cost of goods sold Net Income gross prot net income Part 2: With correction , balanoe sheet amounts Mason Bulldlng Sugplles total assets Income Statement owners equity For the Year ended December 31, 2015 Net Sales Cost of Goods Sold Inventory. January 1 Purchases Cost of Goods Available for Sale Inventory. December 31 Cost of Goods Sold Gross Profit Operating Expenses Net Income