ACCOUNTING PRINCIPLES 122 5/16 >C<
17th Edition
ISBN: 9781323461471
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 6, Problem 7QC
At December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error affect cost of goods sold and net income for 2018?
Learning Objective 5
- Overstates cost of goods sold and understates net income
- Understates cost of goods sold and overstates net income
- Leaves both cost of goods sold and net income correct because the errors cancel each other
- Overstates both cost of goods sold and net income
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At December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error affect cost of goods sold and net income for 2018?
a. Overstates cost of goods sold and understates net income
b. Understates cost of goods sold and overstates net income
c. Leaves both cost of goods sold and net income correct because the errors cancel each other
d. Overstates both cost of goods sold and net income
On December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error affect the cost of goods sold and net income for 2018?
Overstates cost of goods sold and understates net income
Understates cost of goods sold and overstates net income
Leaves both cost of goods sold and net income correct because the errors cancel each other
Overstates both cost of goods sold and net income
(Learning Objective 4: Compute and evaluate gross profit percentage and inventory turnover) The Red Wagon Shop had the following inventory data:2017Ending inventory at:FIFO Cost ...............LIFO Cost...............2018$27,92012,510$ 30,50020,150Cost of goods sold at:FIFO Cost ...............LIFO Cost...............Sales revenue ...............$ 87,63097,980138,000Company managers need to know the company’s gross profit percentage and rate of inventoryturnover for 2018 under1. FIFO.2. LIFO.Which method produces a higher gross profit percentage? A higher inventory turnover?
Chapter 6 Solutions
ACCOUNTING PRINCIPLES 122 5/16 >C<
Ch. 6 - Which principle or concept states that business...Ch. 6 - Which inventory costing method assigns to ending...Ch. 6 - Assume Nile.com began April with 14 units of...Ch. 6 - Suppose Nile.com used the weighted-average...Ch. 6 - Which inventory costing method results in the...Ch. 6 - Which of the following is most closely linked to...Ch. 6 - At December 31, 2018, Stevenson Company overstated...Ch. 6 - Suppose Maestro’s had cost of goods sold during...Ch. 6 - Suppose used the LIFO inventory costing method and...Ch. 6 - Prob. 1RQ
Ch. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Discuss some measures that should be taken to...Ch. 6 - Under a perpetual inventory system, what are the...Ch. 6 - When using a perpetual inventory system and the...Ch. 6 - During periods of rising costs, which inventory...Ch. 6 - What does the lower-of-cost-or market (LCM) rule...Ch. 6 - What account is debited when recording the...Ch. 6 - What is the effect on cost of goods sold, gross...Ch. 6 - When does an inventory error cancel out, and why?Ch. 6 - How is inventory turnover calculated, and what it...Ch. 6 - How is days’ sales inventory calculated, and what...Ch. 6 - When using the periodic inventory system, which...Ch. 6 - When using periodic inventory system and...Ch. 6 - Determining inventory accounting principles...Ch. 6 - Determining inventory costing methods Learning...Ch. 6 - Prob. S6.3SECh. 6 - Prob. S6.4SECh. 6 - Prob. S6.5SECh. 6 - Prob. S6.6SECh. 6 - Prob. S6.7SECh. 6 - Prob. S6.8SECh. 6 - Prob. S6.9SECh. 6 - Prob. S6.10SECh. 6 - Prob. S6A.11SECh. 6 - Prob. S6A.12SECh. 6 - Prob. S6A.13SECh. 6 - Using accounting vocabulary Learning Objective 1,...Ch. 6 - Prob. E6.15ECh. 6 - Prob. E6.16ECh. 6 - Prob. E6.17ECh. 6 - Prob. E6.18ECh. 6 - Prob. E6.19ECh. 6 - Prob. E6.20ECh. 6 - Prob. E6.21ECh. 6 - Prob. E6.22ECh. 6 - Prob. E6.23ECh. 6 - Correcting an inventory error-two years Natural...Ch. 6 - Prob. E6.25ECh. 6 - Prob. E6A.26ECh. 6 - Prob. E6A.27ECh. 6 - Prob. P6.28APGACh. 6 - Prob. P6.29APGACh. 6 - Prob. P6.30APGACh. 6 - Objectives 5, 6 overstated $7,000 P6-31A...Ch. 6 -
Jepson Electronic Center began cost $70...Ch. 6 - Prob. P6.33BPGBCh. 6 - Prob. P6.34BPGBCh. 6 - Accounting principles for inventory and applying...Ch. 6 - Prob. P6.36BPGBCh. 6 - Prob. P6A.37BPGBCh. 6 - Prob. P6.38CPCh. 6 - Prob. P6.39PSCh. 6 - Prob. 6.1DCCh. 6 - > Fraud Case 6-1 Ever since he was a kid, Carl...Ch. 6 - Prob. 6.1FSC
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- Company Elmira reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 32,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?arrow_forwardIf ending inventory is understaffed for year 1, then in year 2…. A. Costa of goods sold and gross profit will both be overstated B. Costs of goods sold and gross profit will be understated C. Costs of goods sold will be overstated and gross profit will be understated D. Costs of food sold will be understated and gross profit will be overstatedarrow_forwardIn taking a physical inventory at the end of Year 1, Grant Company forgot to count certain units and understated ending inventory by $17,500. Determine how this error effects each of the following. Year 1 cost of goods sold. Year 1 net income. Year 2 cost of goods sold. Year 2 net income.arrow_forward
- 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 $______. Enter zero if there is no amount. Inventory Item Amount? None, Understated orOverstated? Beginning Inventory $fill in the blank 1 Purchases fill in the blank 3 Goods Available for Sale fill in the blank 5 Ending Inventory fill in the blank 7 Cost of Goods Sold fill in the blank 9arrow_forwardIn taking a physical inventory at the end of Year 1, Grant Company forgot to count certain units and understated ending inventory by $10,000. Determine how this error affects each of the following. a. Year 1 cost of goods sold c. Year 2 cost of goods sold b. Year 1 net income d. Year 2 net incomearrow_forwardMalcolm Lee Industries reported the following amounts in its December 31st financial statements: 2020 2021 Cost of Goods sold $270,100 $288,600 Ending Inventory 55,600 55,600 Errors were made in each year as follows: in 2020, ending inventory was overstated by $10,600 while in 2021, ending inventory was understated by $6,600. Explain the impact of these errors for 2021 profit and owners’ equity. Profits will be by $ . Owners’ equity will be by $ . Save for Later Last saved 1 day ago. Saved work will be auto-submitted on the due date. Attempts: 0 of 1 used Submit Answerarrow_forward
- (Learning Objectives 1, 2: Show how to account for inventory transactions; applythe FIFO cost method) Accounting records for Jubilee Corporation yield the following datafor the year ended June 30, 2018 (assume sales returns are non-existent):Inventory, June 30, 2017.......................................................................... $ 7,000Purchases of inventory (on account)......................................................... 61,000Sales of inventory—77% on account; 23% for cash (cost $49,000).........Inventory at FIFO, June 30, 2018 ............................................................100,00019,000Requirements1. Journalize Jubilee’s inventory transactions for the year under the perpetual system.2. Report ending inventory, sales, cost of goods sold, and gross profit on the appropriatefinancial statement.arrow_forwardThe accountant for Suzanne Company made the following errors related to inventory in 2020: 1. The beginning inventory for 2020 was overstated by $1,375 due to an error in the physical count. 2. A $1,650 purchase of merchandise on credit in 2020 was not recorded or included in the ending inventory. Assuming a periodic inventory system, how would Sue's cost of goods sold, gross profit, and net income be affected in 2020 by these errors? Set Cost of Goods Sold Gross Profit Net Income I. Overstated Understated Understated II. Overstated Understated No effect III. Understated Overstated Overstated IV. No effect No effect No effect a. Set I b. Set II c. Set III d. Set IVarrow_forwardMalcolm Lee Industries reported the following amounts in its December 31st financial statements: 2020 2021 Cost of Goods sold $280,000 $287,900 Ending Inventory 55,700 55,700 Errors were made in each year as follows: in 2020, ending inventory was overstated by $10,600 while in 2021, ending inventory was understated by $6,700. Explain the impact of these errors for 2021 profit and owners’ equity. Profits will be by $ . Owners’ equity will be by $ .arrow_forward
- I could use some help with homework can you explain how to do this? A mistake was made when counting the ending inventory at December 31, 2018: it was recorded incorrectly as $50,000 (not the correct $60,000). Ending inventory for 2019 was recorded correctly. The effect of this error on the firm's income would be: Group of answer choices -2018 income would be overstated by $10,000. -2018 and 2019 income would be understated by $10,000 for each year. -2018 income would be correct but 2019 would be overstated. -2018 income would be understated by $10,000 and 2019 income would be overstated by $10,000, the errors cancel each other out after 2 years. -None of the above.arrow_forwardIf ending inventory is understated by $25,000, what effect will this have on cost of goods sold and net income? a.Cost of goods sold is overstated by $25,000, and net income is understated by $25,000. b.Cost of goods sold is understated by $25,000, and net income is understated by $25,000. c.Cost of goods sold is understated by $25,000, and net income is overstated by $25,000. d.Cost of goods sold is overstated by $25,000, and net income is overstated by $25,000.arrow_forwardQ1. As of December 321, 2021, Earth Mother’s Corporation physical inventory was $275,000, and its book inventory was $290,000. The effect of the inventory shrinkage on the accounts is: A. To increase Cost of Goods Sold and Inventory by $15,000 B. To increase Cost of Goods Sold and decrease Inventory by $15,000 C.To decrease Cost of Good Sold and increase Inventory by $15,000 D. To decrease Cost of Goods Sold and Inventory by $15,000arrow_forward
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