Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y1, Fonda incorrectly counted its inventory as $443,140 instead of the correct amount of $425,410. Enter all amounts as positive numbers. a. State the effects of the error on the December 31, 20Y1, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated/Understated Amount Inventory $ Current Assets $ Total Assets $ Stockholders' Equity b. State the effects of the error on the income statement of Fonda Motorcycle Shop for the year ended December 31, 20Y1. Income Statement Items Overstated/Understated Amount Cost of Goods Sold $ Gross Profit $ Net Income $ c. If uncorrected, what would be the effects of the error on the 20Y2 income statement? Income Statement Items Understated/Overstated Amount Cost of Goods Sold $ b. State the effects of the error on the income statement of Fonda Motorcycle Shop for the year ended December 31, 20Y1. Income Statement Items Overstated/Understated Amount Cost of Goods Sold $ Gross Profit $ Net Income c. If uncorrected, what would be the effects of the error on the 20Y2 income statement? Income Statement Items Understated/Overstated Amount Cost of Goods Sold $ Gross Profit $ Net Income d. If uncorrected, what would be the effects of the error on the December 31, 20Y2, balance sheet? 1. The December 31, 20Y2, balance sheet would be correct, since the 20Y1 inventory error reverses itself in 2012. 2. In the December 31, 20Y2, balance sheet, inventory would be understated. 3. In the December 31, 20Y2, balance sheet, inventory would be overstated. 4. In the December 31, 20Y2, balance sheet, retained earnings would be understated. Lower-of-Cost-or-Market Inventory On the basis of the following data, determine the value of the inventory at the lower of cost or market. Assemble the data in the form illustrated in Exhibit 10. Cost Per Inventory Quantity Market Value per Unit (Net Realizable Value) Product Unit Class 1 : Model A 15 $100 $97 Model B 34 201 193 Model C 32 186 192 Class 2: Model D 38 124 103 Model E 35 235 254 a. Determine the value of the inventory at the lower of cost or market applied to each item in the inventory. Inventory at the Lower of Cost or Market Market Value Cost per Unit per Unit (Net Realizable Value) Cost Market Inventory Quantity Lower of Cost or Market Product a. Determine the value of the inventory at the lower of cost or market applied to each item in the inventory. Inventory at the Lower of Cost or Market Market Value Cost per Unit (Net Realizable Value) per Unit Cost Market Inventory Quantity Lower of Cost or Market Product Model A $ Model B Model C Model D 1 Model E Total b. Determine the value of the inventory at the lower of cost or market applied to each class of inventory. Inventory at the Lower of Cost or Market Market Value Cost per Unit Cost Market Lower of Cost or Market Inventory Quantity per Unit (Net Realizable Value) Product Class 1: Model A Model B Model c Subtotal O Class 2: Model D $ SD Model E Subtotal Total c. Determine the value of the inventory at the lower of cost or market applied to total inventory. Inventory at the Lower of Cost or Market Market Value Cost per Unit per Unit (Net Realizable Value) Cost Market Inventory Quantity Lower of Cost or Market Product Model A $ Model B Model C Model D Model E Total