Chapter 6 Homework 1. Inventory Errors Haywood Inc. reported the following information for Year 1: 2. Beginning inventory $25,000 3 Ending inventory 42,000 Sales revenue 1,000,000 4. Cost of goods sold 620,000 5. A physical count of inventory at the end of the year showed that ending inventory was actually $65,000. 6. Required: 7. 1. What is the correct cost of goods sold and gross profit for Year 1? 8. Cost of goods sold 607,000 Gross profit 393,000 x 9. 2. Assuming the error was not corrected, what is the effect on the balance sheet at December 31, Year 1? At December 31, Year 2? 10. December 31, Year 1 Understated 11. December 31, Year 2 Overstated 12. Feedback 13. Check My Work 1. Consider the cost of goods sold model: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold. Also, note that Gross Profit = Sales Revenue - Cost of Goods Sold. 2. Note that ending inventory for one period is the beginning inventory for the next period and that Net Income closes to Retained Earnings. Check My Work 2 more Check My Work uses remaining. Next Progress: 1/13 items Assignment Score: 48.08% All work saved. Email Instructor Save and Exit Submit Assignment for Grading