Partial income statements of Schneider Products Inc. are reproduced below:

The 2015 ending inventory was overstated by $2,000 during the physical count and the accounting records were adjusted accordingly. The 2016 physical inventory count was done properly and the accounting records also adjusted to the appropriate balance.

 

Required:

1. Calculate the impact of this error on the gross profit calculated for 2015 and 2016.

2. What is the impact of this error on total assets at the end of 2015 and 2016? Net assets?

 

2015 2016 Sales $50,000 $50,000 Cost of goods sold 20,000 23,000 $27,000 Gross profit $30,000