Question
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
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, 20Y8, Madison incorrectly counted its inventory as $472,190 instead of the correct amount of $486,360.
Enter all amounts as positive numbers.
a. State the effects of the error on the December 31, 20Y8, balance sheet of Madison River Supply.
Balance Sheet Items | Understated/Overstated | Amount |
---|---|---|
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 ended December 31, 20Y8.
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 20Y9 income statement?
Income Statement Items | Overstated / Understated | Amount |
---|---|---|
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? 1. The balance sheet would be correct, because the 20Y8 inventory error reverses itself in 20Y9. 2. The income for 20Y9 would be understated. 3. The current assets in 20Y9 would be overstated. 4. The current assets in 20Y9 would be understated.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started