Answered: If ending inventory in Period 1 is…

Name: If ending inventory in Period 1 is overstated, gross profit in Period
Uploaded: 2024-03-20T06:32:37.000Z
Channel: Bartleby
Description: If ending inventory in Period 1 is overstated, gross profit in Period 2 is

Business

Accounting

If ending inventory in Period 1 is overstated, gross profit in Period 2 is

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter11: The Statement Of Cash Flows

Section: Chapter Questions

Problem 13DQ: What does an increase in inventory imply? How would this increase in inventory be reported under the...

See similar textbooks

Related questions

Q: 8. How do you calculate cost of goods sold on an income statement? A. ČOGS+ Beginning Inventory+…

A: "Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: If ending inventory is understaffed for year 1, then in year 2…. A. Costa of goods sold and gross…

A: Inventory is the term used in accounting which refers to the goods as well as materials that the…

Q: 1. The lower-of-cost-or-market method can be applied to each item of inventory. each major class…

A: In case of multiple questions, we are allowed to solve only the first question. In case if you want…

Q: (A) Assume that the company uses the FIFO method. What is the value of the ending inventory at…

A: 1. FIFO method: Under this method and periodic inventory system is used, the ending inventory stock…

Q: An understatement of ending inventory by $2 million in one period results ina. an overstatement of…

A: Inventory is the detailed list of items that are present on hand. It constitute of all the finished…

Q: Jamison Corporation’s inventory cost in its balance sheet is lower using the first-in, first-out…

A: Option b. down is the answer.

Q: If ending Inventory is overstated at the end of the year, profit will be: O Ovestated b) Understated…

A: Inventory valuation includes different methods that are used by companies to find out the value of…

Q: Compute for Unrealized gross profit in ending inventory- current yr. *

A: Gross profit is the profit which is earned by the company when from the sales all costs of goods…

Q: Total goods available for sale is equal to a. the sum of ending inventory and net purchases. b.…

A: Beginning inventory + Net purchases = Cost of goods sold + Ending inventory Total cost of goods…

Q: An error in the physical count of goods on hand at the end of the current period resulted in a $3000…

A: Any understatement of ending inventory results in decrease in net income. In Trading Account…

Q: 1. Journalize the adjustment for inventory shrinkage. 2. Journalize the adjustment for estimated…

A: Given: Merchandise inventory = $ 5,200 Inventory on June 30, 2018 = $ 4,900 Amount of Sold…

Q: At the end of a reporting period, a company will value its inventory under one or two methods: The…

A: Inventory: Inventory is the raw materials or goods that are held by the business for using in…

Q: What is the effect of a $40000 overstatement of last year's inventory on current years ending…

A: Retained earnings: Retained earnings are share holder funds. It is to be reported in Liabilities…

Q: gross profit method assumes

A: The gross profit technique calculates the value of inventory by combining current period data on net…

Q: BJ Company uses a periodic inventory system. If the company?'s beginning inventory in the current…

Q: Assuming that the perpetual inventory method is used and costs are computed at the time of each…

A: A perpetual inventory system is a method of inventory management that records real-time transactions…

Q: What amount should be reported on Blue Spruce Corp's financial statements, assuming the…

A: The lower of cost or market (LCM) method states that when valuing a company's inventory, it is…

Q: Describe the entry to adjust from cost to net realizable value for inventory write-downs. What…

A: Journal entry: Journal entry is a set of economic events which can be measured in monetary terms.…

Q: Overstating ending inventory in the current year causes net income in the current year to be…

A: 1. True 2. False The weighted-average cost includes both beginning inventory and purchases and is…

Q: Which inventory costing method results in the lowest net income during a period of rising inventory…

A: Answer:LIFO is the correct option

Q: Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of…

A: "Since you have asked multiple questions, we will solve first question for you. If you want any…

Q: What are the effects (UNDERSTATED, OVERSTATED, NO EFFECT AT ALL) of these inventory errors on (a)…

A: Inventory refers to the stock that the company held for resale purposes or the goods that are not…

Q: During times of inflation why does the value of inventory change between FIFO and LIFOevaluations?

A: A company uses various methods for valuing the ending inventory. The different methods can be…

Q: An overstatement of ending inventory results in: Select one: a. an understatement of COGS and an…

A: option a is the correct answer.

Q: When there are no inventory at the beginning or at the end of the period, the total purchases will…

A: Cost of sales means actual cost of goods that is being sold to the customers. It includes beginning…

Q: The inventory at the end of the year was understatedby $14,750. (a) Did the error cause an…

A: (a)

Q: 4. The purchase of inventory items on account using the perpetual inventory method a. Has no…

A: Solution 4: The purchase of inventory items on account using the perpetual inventory method "Has no…

Q: If beginning inventory is understated by $15,000, the effect of this error in the current period is…

A: Inventory error cab effect both Balance Sheet and Income Statement.

Q: If consignment inventory is unsold at the end of the period, who reports the ending inventory on the…

A: Consignment inventory is a property of consignor and the consignor will have all the rights with…

Q: es the periodic inventory method and the beginning inventory is overstated by $9,000 because the…

Q: 1. Prepare the income statement to reflect lower of cost or net realizable value valuation of the…

A: Lower of cost or NRV concept means the inventory should be reported at cost of NRV, whichever is…

Q: If ending inventory of prior year is overstated, retained earnings is understated

A: Ending inventory is reduced in calculation of cost of goods sold. Cost of goods sold = Beginning…

Q: Merchandise inventory at the end of the year is overstated. Which of the following statements…

A: Merchandise inventory at the end of the year is the closing stock which is reported in the balance…

Q: When a company determines that the net realizable value of its ending inventory is lower than its…

A: Lower of cost and net realizable value: The lower of cost and net realizable value is a method which…

Q: December 31, 2020, will be understated. b) gross profit for the year ended December 31, 2019, will…

A: The value of the stock or product that remains at the conclusion of an accounting period is referred…

Q: 50. In a periodic inventory system, the beginning inventory is * O A. Net purchases minus cost of…

A: Beginning inventory xxx Add: Net purchases xxx Cost of goods available for sale xxx Less:…

Q: If a misstatement of inventory occurs, the net income for-----periods will be misstated

A: The ending inventory affects the income statement and after that ending inventory becomes the…

Q: If ending inventory is overstated in the current fiscal year, what effect will this have on net…

A: The question is multiple choice question and related with overstated ending inventory. The ending…

Q: 1. Compute the cost of inventory on December 31, 2021. Note: Round off the weighted average unit…

A: In case of weighted average method, after each purchase a weighted average rate is calculated from…

Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

Topic Video

Question

100%

If ending inventory in Period 1 is overstated, gross profit in Period 2 is

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

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

What is the basic assumption underlying the gross profit method? How may the gross profit percentage for the prior year be modified to provide a better estimate of the inventory value?
What does an increase in inventory imply? How would this increase in inventory be reported under the indirect method?
LO1 If the ending inventory is overstated by 10,000, indicate what, if anything, is incorrect about the following: Cost of goods sold___________ Gross profit___________ Net income___________ Ending owners capital___________
When would using the FIFO inventory costing method produce higher inventory account balances than the LIFO method would? A. inflationary times B. deflationary times C. always D. never
An overstatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-1.
Using the following data, how should the inventory be valued under lower of cost or market? Original cost 1,350 Estimated selling price 1,475 Selling expenses 180
If a group of inventory items costing $3,200 had been double counted during the year-end inventory count, what impact would the error have on the following inventory calculations? Indicate the effect (and amount) as either (a) none, (b) understated $______, or (c) overstated $______. Table 10.2
Inventory Valuation Specific identification method Weighted average cost method FIFO method LIFO method LIFO liquidation LIFO conformity rule LIFO reserve Replacement cost Inventory profit Lower-of-cost-or-market (LCM) rule Inventory turnover ratio Number of days sales in inventory Moving average (Appendix) The name given to an average cost method when a weighted average cost assumption is used with a perpetual inventory system. An inventory costing method that assigns the same unit cost to all units available for sale during the period. A conservative inventory valuation approach that is an attempt to anticipate declines in the value of inventory before its actual sale. An inventory costing method that assigns the most recent costs to ending inventory. The current cost of a unit of inventory. An inventory costing method that assigns the most recent costs to cost of goods sold. A measure of how long it takes to sell inventory. The IRS requirement that when LIFO is used on a tax return, it must also be used in reporting income to stockholders. An inventory costing method that relies on matching unit costs with the actual units sold. The portion of the gross profit that results from holding inventory during a period of rising prices. The result of selling more units than are purchased during the period, which can have negative tax consequences if a company is using LIFO. The excess of the value of a companys inventory stated at FIFO over the value stated at LIFO. A measure of the number of times inventory is sold during the period.
Using the following data, how should the inventory be valued under lower of cost or market? Original cost 1,350 Estimated selling price 1,475 Selling expenses 180
Assuming a companys year-end inventory were overstated by $5,000, indicate the effect (overstated/understated/no effect) of the error on the following balance sheet and income statement accounts. A. Income Statement: Cost of Goods Sold B. Income Statement: Net Income C. Balance Sheet: Assets D. Balance Sheet: Liabilities E. Balance Sheet: Equity
Use the weighted-average (AVG) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.
If a group of inventory items costing $15,000 had been omitted from the year-end inventory count, what impact would the error have on the following inventory calculations? Indicate the effect (and amount) as either (a) none, (b) understated $______, or (c) overstated $______. Table 10.1