Shockley Co. reported the following amounts in its financial statements: In making the physical counts of inventory,
Question:
Shockley Co. reported the following amounts in its financial statements:
• Inventory on December 31, 2014: understated $70,000
• Inventory on December 31, 2015: overstated $32,000
Required:
For each of the preceding financial statement items-(a), (b), (c), and (d)-prepare a schedule similar to the following and show the adjustments that would have been necessary to correct the reported amounts.
Analysis Component:
What is the error in the aggregate net income for the three-year period that resulted from the inventory errors? Explain why this result occurs. Also explain why the understatement of inventory by $70,000 at the end of 2014 resulted in an understatement of equity by the same amount that year.
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Related Book For
Fundamental Accounting Principles
ISBN: 978-0071051507
Volume I, 14th Canadian Edition
Authors: Larson Kermit, Tilly Jensen
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