Partial income statements for Sherwood Company summarized for a four-year period show the following: 2018 2019 2020 2021 Net Sales $ 2,300,000 $ 2,700,000 $ 3,300,000 $ 2,800,000 1,820,000 $ 980,000 Cost of Goods Sold 1,472,000 1,701,000 2,112,000 Gross Profit $ 828,000 $ 999,000 $ 1,188,000 An audit revealed that in determining these amounts, the ending inventory for 2019 was overstated by $21,200. The inventory balance on December 31, 2020, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. 2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. 2-b. Do the results lend confidence to your corrected amounts?

Partial income statements for Sherwood Company summarized for a four-year period show the following: 2018 2019 2020 2021 Net Sales $ 2,300,000 $ 2,700,000 $ 3,300,000 $ 2,800,000 1,820,000 $ 980,000 Cost of Goods Sold 1,472,000 1,701,000 2,112,000 Gross Profit $ 828,000 $ 999,000 $ 1,188,000 An audit revealed that in determining these amounts, the ending inventory for 2019 was overstated by $21,200. The inventory balance on December 31, 2020, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. 2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. 2-b. Do the results lend confidence to your corrected amounts?

Fundamentals of Financial Management (MindTap Course List)

15th Edition

ISBN:9781337395250

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter4: Analysis Of Financial Statements

Section: Chapter Questions

Problem 24P: Income Statement for Year Ended December 31, 2018 (Millions of Dollars) Net sales 795.0 Cost of...

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