Answered: During 2011 Evelyn Co. Ltd discovered…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 5E: Fava Company began operations in 2018 and used the LIFO inventory method for both financial...

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Question

During 2011 Evelyn Co. Ltd discovered that certain items had been included in inventory at
31 December 2010, valued at $ 2.1m, which had in fact been sold before the year end. The
following figures for 2010 (as reported) and 2011 (draft) are available.
2010 2011(draft)
$’000 $’000
Sales 23,700 33,600
Cost of goods sold (17,285) (27,900)
Profit before taxation 6,415 5,700
Income taxes (1,925) (1,710)
Profit for the period 4,490 3,990
Retained earnings at 1 January 2010 and 1 January 2011 were $6,500,000 and 10,990,500
respectively. The cost of goods sold for 2011 includes the $2.1m error opening inventory. The
income tax rate was 30% for 2010 and 2011. No dividends have been declared or paid.
Required:
Show the income statement for 2011, with the 2010 comparative, and retained earnings of
Evelyn Co. Ltd

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