In March 2018, Blue Devil Company realized that they had overstated their December 2016 ending inventory by $15,000. If the reported Net Income for 2017 was $125,000, what should be the correct Net Income for 2017? Why is the answer 140,000? If ending inventory is overstated by 15k wouldnt cost of goods sold be understated by 15k making Net income be overstated by 15k, therefore subtracting 15k from the net income to correct the error?  why would one add 15k to Net income to get 140k?

Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter10: Inventory
Section: Chapter Questions
Problem 2TP: Assume your company uses the periodic inventory costing method, and the inventory count left out an...
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  1. In March 2018, Blue Devil Company realized that they had overstated their December 2016 ending inventory by $15,000. If the reported Net Income for 2017 was $125,000, what should be the correct Net Income for 2017?

Why is the answer 140,000? If ending inventory is overstated by 15k wouldnt cost of goods sold be understated by 15k making Net income be overstated by 15k, therefore subtracting 15k from the net income to correct the error?  why would one add 15k to Net income to get 140k?

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