1. Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $725,720 instead of the correct amount of $747,490.

   Enter all amounts as positive numbers.

   a. State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply.

   Balance Sheet Items	Understated/Overstated	Amount
   Merchandise Inventory	UnderstatedOverstatedNo effect	$fill in the blank 2
   Current Assets	UnderstatedOverstatedNo effect	fill in the blank 4
   Total Assets	UnderstatedOverstatedNo effect	fill in the blank 6
   Owner's Equity	UnderstatedOverstatedNo effect	fill in the blank 8

   b. State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2.

   Income Statement Items	Overstated/Understated	Amount
   Cost of Merchandise Sold	OverstatedUnderstatedNo effect	$fill in the blank 10
   Gross Profit	OverstatedUnderstatedNo effect	fill in the blank 12
   Net Income	OverstatedUnderstatedNo effect	fill in the blank 14

   c. If uncorrected, what would be the effect of the error on the 20Y3 income statement?

   Income Statement Items	Overstated/Understated	Amount
   Cost of Merchandise Sold	OverstatedUnderstatedNo Effect	$fill in the blank 16
   Gross Profit	OverstatedUnderstatedNo Effect	fill in the blank 18
   Net Income	OverstatedUnderstatedNo Effect	fill in the blank 20

   d. If uncorrected, what would be the effect of the error on the December 31, 20Y3, balance sheet?

   1. The December 31, 20Y3, balance sheet would be correct, since the 20Y2 inventory error reverses itself in 20Y3.
   2. The December 31, 20Y3, balance sheet would be incorrect, since the 20Y2 inventory error overstates the beginning inventory in20Y3.
   3. The December 31, 20Y3, balance sheet would be incorrect, since the 20Y2 inventory error understates the beginning inventory in 20Y3.

   123

Check My Work1 more Check My Work uses remaining.