Cullumber Fishing Gear reported the following amounts for its cost of goods sold and ending inventory:

Cullumber made two errors: $(1)2023$ ending inventory was overstated by $$7,040,$ and $(2)2024$ ending inventory was understated by

$$5,540.$

$($a$)$

Correct Answer

Your answer is partially correct.

Calculate the correct cost of goods sold and ending inventory for each year. Determine the impact of the errors on profit for $2023$ and $2024$ and on owner's equity at the end of $2023$ and $2024.$

In $2023$ profit is

by $

$,$ the amount of the error in ending inventory. This error flows

through to owner's equity in $2023$ to produce an

of $

In $2024$ both errors have an impact. The net effect is an

of profit by $

$.$ This is a

result of the $$7,040$

of the beginning inventory plus $

ending inventory.

Owner's equity in $2024$ would show only an

of $

The $$7,040$

of $2023$ would be offset by the $$7,040$

in profit caused by the impact on beginning

inventory in $2024.$

eTextbook and Media

Attempts: $0$ of $3$ used