Question
Eddie's Galleria sells billiard tables. The company has the following purchases and sales for 2018. Date Transaction Units Cost per Unit Total Cost January 1
Eddie's Galleria sells billiard tables. The company has the following purchases and sales for 2018.
Date | Transaction | Units | Cost per Unit | Total Cost |
January 1 | Beginning inventory | 150 | $540 | $81,000 |
March 8 | Purchase | 120 | 570 | 68,400 |
August 22 | Purchase | 100 | 600 | 60,000 |
October 29 | Purchase | 80 | 640 | 51,200 |
450 | $260,600 | |||
Jan. 1Dec. 31 | Sales($700 each) | 400 |
Eddie is worried about the company's financial performance. He has noticed an increase in the purchase cost of billiard tables, but at the same time, competition from other billiard table stores and other entertainment choices have prevented him from increasing the sales price. Eddie is worried that if the company's profitability is too low, stockholders will demand he be replaced. Eddie does not want to lose his job. Since 60 of the 400 billiard tables sold have not yet been picked up by the customers as of December 31, 2018, Eddie decides incorrectly to include these tables in ending inventory. He appropriately includes the sale of these 60 tables as parts of total revenues in 2018.
Question: | |
. | Assuming that ending inventory is correctly counted at the end of 2019, what effect will the inventory error in 2018 have on reported amounts for (a) ending inventory, (b) retained earnings, (c) cost of goods sold, and (d) net income (ignoring tax effects) in 2019? |
I've seen other answers from this problem that made the solution really complicated and I'm still confused. Please help!
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