Effect of Errors in Physical Inventory

Eclipse Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 2014, Eclipse Motorcycle Shop incorrectly counted its inventory as $285,160 instead of the correct amount of $273,750.

Enter all amounts as positive numbers.

a. State the effect of the error on the December 31, 2014, balance sheet of Eclipse Motorcycle Shop.

Balance Sheet Items	Overstated / Understated	Amount
Merchandise Inventory		$
Current Assets		$
Total Assets		$
Owner's Equity		$

b. State the effect of the error on the income statement of Eclipse Motorcycle Shop for the year ended December 31, 2014.

Income Statement Items	Overstated / Understated	Amount
Cost of Merchandise Sold		$
Gross Profit		$
Net Income		$

c. If uncorrected, what would be the effect of the error on the 2015 income statement?

Income Statement Items	Understated / Overstated	Amount
Cost of Merchandise Sold		$
Gross Profit		$
Net Income		$