Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company. To Calculate: Prepare the following table.

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Answer 1

Question

Chapter 5, Problem 6PSB

1.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Prepare the following table.

2.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Error in the combined income for 3 year period.

3.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Explain: Understatement of inventory also affects the understatement of equity or not.

Expert Solution & Answer

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Required information P7-6 (Algo) Analyzing and Interpreting the Effects of Inventory Errors LO7-5 [The following information applies to the questions displayed below.] The income statement for Pruitt Company summarized for a four-year period shows the following: Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (30%) Net income P7-6 Part 1 2016 2017 $2,041,000 $2,469,000 1,618,000 1,492,000 549,000 484,000 65,000 19,500 $45,500 Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (30%) Net income 851,000 496,000 355,000 106,500 $248,500 496,000 334,000 2018 $2,712,000 1,781,000 100,200 233,800 931,000 522,000 409,000 122,700 $286,300 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $21,000. The company uses a periodic inventory system. Answer is complete but not entirely correct. PRUITT COMPANY Income Statement For the Four-Year Period 2016 2017 $ 2,041,000…

Errors in Inventory Count Bow Corp. accidentally overstated its 2015 ending inventory by $750. Assume that ending 2016 inventory is accurately counted. The error in 2015 will have what effect on Bow Corp.? Oa. 2015 net income is understated by $750 Ob. 2015 net income is overstated by $750. Oc, 2016 net income is understated by $750. Od. Both b and c are correct.

M7-17 Calculating Effect of Inventory Errors For each of the following scenarios, determine the effect of the error on income in the current period and in the subsequent period. To answer these questions, rely on the inventory equation: Beginning inventory + Purchases - Cost of goods sold = Ending inventory a. Porter Company received a shipment of merchandise costing $32,000 near the end of the ﬁscal year. The shipment was mistakenly recorded at a cost of $23,000. b. Chiu, Inc., purchased merchandise costing $16,000. When the shipment was received, it was determined that the merchandise was damaged in shipment. The goods were returned to the supplier, but the accounting department was not notiﬁed and the invoice was paid. c. After taking a physical count of its inventory, Murray Corporation determined that it had “shrink” of $12,500, and the books were adjusted accordingly. However, inventory costing $5,000 was never counted

Answer 2

Question

Chapter 5, Problem 6PSB

1.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Prepare the following table.

2.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Error in the combined income for 3 year period.

3.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Explain: Understatement of inventory also affects the understatement of equity or not.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 5, Problem 6PSB

1.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Prepare the following table.

2.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Error in the combined income for 3 year period.

3.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Explain: Understatement of inventory also affects the understatement of equity or not.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 5, Problem 6PSB

1.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Prepare the following table.

2.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Error in the combined income for 3 year period.

3.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Explain: Understatement of inventory also affects the understatement of equity or not.

Expert Solution & Answer

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See solution

Answer 5

Chapter 5, Problem 6PSB

1.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Prepare the following table.

2.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Error in the combined income for 3 year period.

3.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Explain: Understatement of inventory also affects the understatement of equity or not.

Answer 6

Chapter 5, Problem 6PSB

1.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Prepare the following table.

Answer 7

Chapter 5, Problem 6PSB

1.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Prepare the following table.

Answer 8

2.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Error in the combined income for 3 year period.

Answer 9

2.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Calculate: Error in the combined income for 3 year period.

Answer 10

3.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Explain: Understatement of inventory also affects the understatement of equity or not.

Answer 11

3.

Summary Introduction

Concept Introduction:

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company.

To Explain: Understatement of inventory also affects the understatement of equity or not.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 5 - Prob. 1DQ Ch. 5 - Prob. 2DQ Ch. 5 - Why are incidental costs sometimes ignored in...Ch. 5 - Prob. 4DQ Ch. 5 - Prob. 5DQ Ch. 5 - Prob. 6DQ Ch. 5 - Prob. 7DQ Ch. 5 - Prob. 8DQ Ch. 5 - Prob. 9DQ Ch. 5 - Prob. 10DQ

Overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory. Understatement of inventory means that inventory amount is reduced wrongly which could be increased by the company. To Calculate: Prepare the following table.

Solution Summary: The author explains that overstatement of inventory means that inventory amount is increased wrongly which could be reduced by reducing the inventory.

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