Question: Considering the year-ending adjusting journal entries for the periodic inventory system. If I miscount my ending inventory, what is the effect on the balance sheet? What is the effect on the income statement? For example, at the year-end inventory count, there is a mistake and I count 30,000 units of inventory when 29,000 actually exist. I make the year-end journal entries with 30,000 as my number of units in inventory. What is the effect on the balance sheet and income statement for that year? Potential Extra Credit: What is true about the balance sheet in year 2 if my ending inventory count is correct in year 2 (after being miscounted in year 1)? What about the income statement in year 2?
Question: Considering the year-ending adjusting journal entries for the periodic inventory system. If I miscount my ending inventory, what is the effect on the balance sheet? What is the effect on the income statement? For example, at the year-end inventory count, there is a mistake and I count 30,000 units of inventory when 29,000 actually exist. I make the year-end journal entries with 30,000 as my number of units in inventory. What is the effect on the balance sheet and income statement for that year? Potential Extra Credit: What is true about the balance sheet in year 2 if my ending inventory count is correct in year 2 (after being miscounted in year 1)? What about the income statement in year 2?
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
Chapter7: Inventories: Cost Measurement And Flow Assumptions
Section: Chapter Questions
Problem 11RE: Jessie Stores uses the periodic system of calculating inventory. The following information is...
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Transcribed Image Text:Question: Considering the year-ending adjusting journal entries for the periodic inventory system. If I
miscount my ending inventory, what is the effect on the balance sheet? What is the effect on the income
statement? For example, at the year-end inventory count, there is a mistake and I count 30,000 units of
inventory when 29,000 actually exist. I make the year-end journal entries with 30,000 as my number of
units in inventory. What is the effect on the balance sheet and income statement for that year?
Potential Extra Credit: What is true about the balance sheet in year 2 if my ending inventory count is
correct in year 2 (after being miscounted in year 1)? What about the income statement in year 2?
Expert Solution
Step 1
Formula:
Cost of goods sold= opening inventory+purchases - closing inventory.
Gross profit = sales - cost of goods sold.
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