Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December $31,20Y8,$ Fonda Motorcycle Shop incorrectly counted its inventory as $$268924$ instead of the correct amount of $$236724.$

Enter all amounts as positive numbers.

Answer:

a$.$ State the effect of the error on the December $31,20$Y$8,$ balance sheet of Fonda Motorcycle Shop.

$\backslash$table$[[$Balance Sheet Item,Overstated$/$Understated$,$Amount $($Put in as positive$)],[$Merchandise Inventory,,$],[$Current Assets,,$],[$Total Assets,,$],[$Owner$\text{'}$s Equity,,$]]$

b$.$ State the effect of the error on the income statement of Fonda Motorcycle Shop for the year ended December $31,20$Y$8.$

$\backslash$table$[[$Income Statement Item,Overstated$/$Understated$,$Amount $($put in as a positive number$)],[$Cost of Merchandise Sold,,$],[$Gross Profit,,$],[$Net Income,,$]]$