The records of Kmeta Inc. show the following data for the years ended July 31: After the
Question:
The records of Kmeta Inc. show the following data for the years ended July 31:
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After the company's July 31, 2018, year end, the accountant discovers two errors:
1. Ending inventory on July 31, 2016, was actually $33,000, not $24,000. Kmeta owned goods held on consignment at another company that were not included in the inventory count.
2. Kmeta purchased $15,000 of goods from a supplier on July 30, 2017, with shipping terms FOB shipping point. Kemta did not receive the goods until August 4, 2017 at which time the company recorded the purchase.
Instructions
(a) For each of the three years, prepare both incorrect and corrected income statements through to income before income tax.
(b) What is the combined (total) impact of these errors on retained earnings (ignoring any income tax effects) for the three years before correction? After correction?
(c) Calculate both the incorrect and corrected inventory turnover ratios for 2018 and 2017.
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
a INCORRECT KMETA INC Income Statement Year Ended July 31 2018 2017 2016 Sales 340000 320000 300000 Cost of goods sold 233000 220000 209000 Gross prof...View the full answer
Financial Accounting Tools for Business Decision Making
ISBN: 978-1119368458
7th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
