Question
Problem 5-6A (Algo) Analysis of inventory errors LO A2 Navajo Companys year-end financial statements show the following. The company recently discovered that in making physical
Problem 5-6A (Algo) Analysis of inventory errors LO A2
Navajo Companys year-end financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory is understated by $56,000 and Year 2 ending inventory is overstated by $26,000.
| For Year Ended December 31 | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| (a) Cost of goods sold | $ 731,000 | $ 961,000 | $ 796,000 |
| (b) Net income | 274,000 | 281,000 | 256,000 |
| (c) Total current assets | 1,253,000 | 1,366,000 | 1,236,000 |
| (d) Total equity | 1,393,000 | 1,586,000 | 1,251,000 |
Required:
- For each key financial statement figure(a), (b), (c), and (d) aboveprepare a table to show the adjustments necessary to correct the reported amounts.
- What is the total error in combined net income for the three-year period resulting from the inventory errors?
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Crash Course Medical Research Audit And Teaching The Essentials For Career Success
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