In comparing income statement information for the years ended December 31, 2014 and 2015, the owner noticed an increase in the gross profit. He was puzzled because he knew that inventory costs were increasing.
A detailed review of the records showed the following:
a. Goods with a cost of $37,500 were on consignment at another location. Through an error, they were not included in the inventory of December 31, 2014.
b. $16,000 of merchandise inventory purchased on December 25, 2015, was shipped FOB Shipping Point and received on January 6, 2016. It was not included in inventory on December 31, 2015, in error.
c. While performing the physical inventory count on December 31, 2015, a calculation error was discovered that caused inventory on hand to be overstated by $24,500.
Required:
1. Using the information provided, complete the schedule showing the corrected income statement information (round percentages to the nearest whole number).
2. Does the new gross profit information reflect the owner's knowledge of increasing inventory costs?