Question
Partial income statements for Sherwood Company summarized for a four-year period show the following: 2015 2016 2017 2018 Net Sales $1,200,000 $1,600,000 $1,700,000 $2,200,000 cost
Partial income statements for Sherwood Company summarized for a four-year period show the following:
2015 | 2016 | 2017 | 2018 | |
Net Sales | $1,200,000 | $1,600,000 | $1,700,000 | $2,200,000 |
cost of Goods Sold | $936,000 | $1,232,000 | $1,343,000 | $1,716,000 |
Gross Profit | $264,000 | $368,000 | $357,000 | $484,000 |
|
An audit revealed that in determining these amounts, the ending inventory for 2016 was overstated by $12,000. The inventory balance on December 31, 2017, was accurately stated. The company uses a periodic inventory system. Required:
- 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
- 2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction.
- 2-b. Does the pattern of gross profit percentages lend confidence to your corrected amounts?
Req 1 Question: Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
Sherwood Company | ||||
---|---|---|---|---|
Income Statements (corrected) | ||||
2015 | 2016 | 2017 | 2018 | |
Net Sales | ||||
Cost of Goods Sold | ||||
Gross Profit |
Req 2a: Compute the gross profit percentage for each year (a) before the correction and (b) after the correction.
2015 | 2016 | 2017 | 2018 | |
Before Correction | ____% | ____% | ____% | ____% |
After Correction | ____% | ____% | ____% | ____% |
Req 2b: Does the pattern of gross profit percentages lend confidence to your corrected amounts? Yes or No?
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