Effect of Errors in Physical Inventory

Madison River Supply Co$.$ sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December $31,20$Y$8,$ Madison incorrectly counted its inventory as $$803,980$ instead of the correct amount of $$828,100.$

Enter all amounts as positive numbers.

a$.$ State the effects of the error on the December $31,20$Y$8,$ balance sheet of Madison River Supply.

Balance Sheet Items

Inventory

Current Assets

Total Assets

Stockholders' Equity

b$.$ State the effects of the error on the income statement of Madison River Supply for the year enorstated

Income Statement Items

Cost of Goods Sold

Gross Profit

Net Income

c$.$ If uncorrected, what would be the effects of the error on the $20Y9$ income statement?

Income Statement Items

Cost of Goods Sold

Gross Profit

Net Income

d$.$ If uncorrected, what would be the effects of the error on the December $31,20Y9,$ balance sheet?

The balance sheet would be correct, because the $20Y8$ inventory error reverses itself in $20Y9.$

The income for $20Y9$ would be understated.