problem 6-3A

Problem 6-3A Analysis of inventory errors AZ X mhhe.com/wildFAP210 Check (1) Corrected net income 2012, $286,000, 2013, $200,000, 2014, $261,000 Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2012, is understated by $56,000, and inventory on December 31, 2013, is overstated by $20,000. For Year Ended December 31 2012 2013 2014 (a) Cost of goods sold $ 615,000 $ 957,000 $ 780,000 (b) Net Income... 285,000 L 241,000 (c) Total current assets. 230,000 1,255,000 1,387,000 1,365,000 1,200,000 1,530,000 1,242,000 (d) Total equity.. Required 1. For each key financial statement figure-(a), (b), (c), and (d) above-prepare a table similar to the following to show the adjustments necessary to correct the reported amounts. 2012 2013 Figure: 2014 Reported amount.... Adjustments for: 12/31/2012 error. 12/31/2013 error Corrected amount Analysis Component 2. What is the error in total net income for the combined three-year period resulting from the inventory errors? Explain. 3. Explain why the understatement of inventory by $56,000 at the end of 2012 results in an understate- ment of equity by the same amount in that year. Information: Seminole Company began year 2013 with 23,000 units of product in its January 1 inventory costing $15 each. It made successive purchases of its product in year 2013 as follows. The company uses a periodic inventory system. On December 31, 2013, a physical count reveals that 40,000 units of its product remain in inventory. Problem G 40^ Periodic: Alternative cost flows P3 X $18.00 each Mar. 7 May 25... Aug .... 30,000 units 39,000 units mhhe.com/wildFAP21e $20.00 each 23,000 units @ $25.00 each Nov 10... 35,000 units $26.00 each Required 1. Compute the number and total cost of the units available for sale in year 2013. Check (2) Cost of goods sold. FIFO, $2,115,000, LIFO, $2,499.000, WA, $2,310,000 2. Compute the amounts assigned to the 2013 ending inventory and the cost of goods sold using (a) FIFO. (b) LIFO, and (c) weighted average. (Round all amounts to dollars and cents.)