Check my work FRAME SUPPLIES Income Statement For the Year Ended December 31, Year 1 Sales $ 73,700 Cost of goods sold (32,110) Gross margin 41,590 Operating expenses (9,440) Net income $ 32,150 During the year-end audit the following errors were discovered: 1. An $1,689 payment for repairs was erroneously charged to the Cost of Goods Sold account. (Assume that the perpetual inventory system is used.) 2. Sales to customers for $2,885 at December 31, Year 1, were not recorded in the books for Year 1. Also, the $1,166 cost of goods sold was not recorded. 3. A mathematical error was made in determining ending inventory. Ending inventory was understated by $854. (The Inventory account was mistakenly written down to the Cost of Goods Sold account.) Required Determine the effect, if any, of each of the errors on the following items. Give the dollar amount of the effect and whether it would overstate (O), understate (U), or not affect (NA) the account. The first item for each error is recorded as an example, Error No 1 Error No 2 Error No 3 Give the dollar amount of the effect and state whether the payment made for repairs erroneously charged $1,689 to the cost of Goods Sold account would overstate (O), understate (U), or not affect (NA) the account. The first item of the error is recorded as an example. (Input the amount as a positive value.) Amount of Effect Error NA NA Error No. 1 Sales, Year 1 Ending inventory, December 31, Year 1 Gross margin, Year 1 Beginning inventory, January 1, Year 2 Cost of goods sold, Year 1 Net income, Year 1 Retained earnings, December 31, Year 1 Total assets, December 31, Year 1 Error No Error No 2 > Error No 1 Error No 2 Error No 3 Give the dollar amount of the effect and state whether Sales to customers for $2, cost of goods sold $1,166 not recorded in the books would overstate (O), underst first item of the error is recorded as an example. (Input the amount as a positive Error No. 2 Amount of Effect Error $ 2,885 U Sales, Year 1 Ending inventory, December 31, Year 1 Gross margin, Year 1 Beginning inventory, January 1, Year 2 Cost of goods sold, Year 1 Net income, Year 1 Retained earnings, December 31, Year 1 Total assets, December 31, Year 1 Error No 1 Error No 2 Error No 3 Give the dollar amount of the effect and state whether a mathematical error mad understating the same by $854 would overstate (O), understate (U), or not affec is recorded as an example. (Input the amount as a positive value.) Error No. 3 Amount of Effect Error NA NA Sales, Year 1 Ending inventory, December 31, Year 1 Gross margin, Year 1 Beginning inventory, January 1, Year 2 Cost of goods sold, Year 1 Net income, Year 1 Retained earnings, December 31, Year 1 Total assets, December 31, Year 1
