Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Brilliant Video Sales Ltd. reported the following data. The shareholders are very happy with Brilliant's steady increase in net income. (Click the icon to

image text in transcribedimage text in transcribedimage text in transcribed

Brilliant Video Sales Ltd. reported the following data. The shareholders are very happy with Brilliant's steady increase in net income. (Click the icon to view the income statements.) Auditors discovered that the ending inventory for 2018 was understated by $3 million and that the ending inventory for 2019 was also understated by $3 million. The ending inventory at December 31, 2020, was correct. Requirements 1. Show corrected income statements for each of the three years. 2. How much did these assumed corrections add to or take away from Brilliant's total net income over the three-year period? How did the corrections affect the trend of net income? 3. Will Brilliant's shareholders still be happy with the company's trend of net income? Give a reason for your answer. Requirement 1. Show corrected income statements for each of the three years. Brilliant Video Sales Ltd. Income Statements (adapted; amounts in millions) Years Ended December 31, 2020, 2019, and 2018 Net sales revenue Cost of goods sold: Beginning inventory Purchases Goods available for sale Less: Ending inventory Cost of goods sold Gross profit Total operating expenses Net income 2020 2019 2018 Brilliant Video Sales Ltd. reported the following data. The shareholders are very happy with Brilliant's steady increase in net income. (Click the icon to view the income statements.) Auditors discovered that the ending inventory for 2018 was understated by $3 million and that the ending inventory for 2019 was also understated by $3 million. The ending inventory at December 31, 2020, was correct. Requirements 1. Show corrected income statements for each of the three years. 2. How much did these assumed corrections add to or take away from Brilliant's total net income over the three-year period? How did the corrections affect the trend of net income? 3. Will Brilliant's shareholders still be happy with the company's trend of net income? Give a reason for your answer. Requirement 1. Show corrected income statements for each of the three years. Brilliant Video Sales Ltd. Income Statements (adapted; amounts in millions) Years Ended December 31, 2020, 2019, and 2018 Net sales revenue Cost of goods sold: Beginning inventory Purchases Goods available for sale Less: Ending inventory Cost of goods sold Gross profit Total operating expenses Net income 2020 2019 2018 Income statements (Amounts in millions) Brilliant Video Sales Ltd. Income Statements for the Years Ended 2020 2019 2018 $ 45 $ 42 $ 39 Net sales revenue Cost of goods sold: Beginning inventory $ 8 7 $ 6 30 28 26 Purchases Goods available for sale 38 35 32 (9) (8) (7) Less: Ending inventory 29 27 25 Cost of goods sold Gross profit 16 15 14 1 1 1 Total operating expenses Net income $ 15 $ 14 $ 13

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamental Managerial Accounting Concepts

Authors: Edmonds, Tsay, olds

6th Edition

71220720, 78110890, 9780071220729, 978-0078110894

More Books

Students also viewed these Accounting questions