Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y8, Fonda Motorcycle Shop incorrectly counted its inventory as $157,760 instead of the correct amount of $151,450. Enter all amounts as positive numbers. a. State the effect of the error on the December 31, 20Y8, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated/Understated Amount Merchandise Inventory $ Current Assets Total Assets Owner's Equity b. State the effect of the error on the income statement of Fonda Motorcycle Shop for the year ended December 31, 20Y8. Income Statement Items Overstated/Understated Amount Cost of Merchandise Sold $ Gross Profit Net Income c. If uncorrected, what would be the effect of the error on the 20Y9 income statement? Income Statement Items Understated/Overstated Amount Cost of Merchandise Sold $ Gross Profit Net Income d. If uncorrected, what would be the effect of the error on the December 31, 20Y9, balance sheet? The December 31, 20Y9, balance sheet would be correct, since the 20Y8 inventory error reverses itself in 20Y9. The December 31, 20Y9, balance sheet would be incorrect, since the 20Y8 inventory error understates the inventory in 20Y9. The December 31, 20Y9, balance sheet would be incorrect, since the 20Y8 inventory error overstates the inventory in 20Y9.

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter20: Accounting For Inventory

Section20.3: Estimating Inventory

Problem 1WT

See similar textbooks

Related questions

Question

Effect of Errors in Physical Inventory

Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y8, Fonda Motorcycle Shop incorrectly counted its inventory as $157,760 instead of the correct amount of $151,450.

Enter all amounts as positive numbers.

a. State the effect of the error on the December 31, 20Y8, balance sheet of Fonda Motorcycle Shop.

Balance Sheet Items	Overstated/Understated	Amount
Merchandise Inventory		$
Current Assets
Total Assets
Owner's Equity

b. State the effect of the error on the income statement of Fonda Motorcycle Shop for the year ended December 31, 20Y8.

Income Statement Items	Overstated/Understated	Amount
Cost of Merchandise Sold		$
Gross Profit
Net Income

c. If uncorrected, what would be the effect of the error on the 20Y9 income statement?

Income Statement Items	Understated/Overstated	Amount
Cost of Merchandise Sold		$
Gross Profit
Net Income

d. If uncorrected, what would be the effect of the error on the December 31, 20Y9, balance sheet?

The December 31, 20Y9, balance sheet would be correct, since the 20Y8 inventory error reverses itself in 20Y9.
The December 31, 20Y9, balance sheet would be incorrect, since the 20Y8 inventory error understates the inventory in 20Y9.
The December 31, 20Y9, balance sheet would be incorrect, since the 20Y8 inventory error overstates the inventory in 20Y9.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions