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Bridgeport Limited has a calendar-year accounting period. The following errors were discovered in 2017. 1. The December 31, 2015 merchandise inventory had been understated by
Bridgeport Limited has a calendar-year accounting period. The following errors were discovered in 2017.
1. | The December 31, 2015 merchandise inventory had been understated by $51,100. | |
2. | Merchandise purchased on account in 2016 was recorded on the books for the first time in February 2017, when the original invoice for the correct amount of $2,600 arrived. The merchandise had arrived on December 28, 2016, and was included in the December 31, 2016 merchandise inventory. The invoice arrived late because of a mix-up by the wholesaler. | |
3. | Inventory, valued at $1,300, held on consignment by Bridgeport was included in the December 31, 2016 count. |
Calculate the effect of each error on the 2016 net income.
QUESTION:
1. | Net income/(loss) for 2016 is (PICK ONE) (no effect)/ (overstated)/ understated) by $ _______ (By how much?) | |
2. | Net income/(loss) for 2016 is (PICK ONE) (no effect)/ (overstated)/ understated) by $ _______ (By how much?) | |
3. | Net income/(loss) is (PICK ONE) (no effect)/ (overstated)/ understated) by $ _______ (By how much?) |
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