Answered step by step
Verified Expert Solution
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
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
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