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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Research and Analysis Using the Annual Report

Obtain Wal-Mart’s 2016 annual report either through the "Investor Relations" portion of its website (do a web search for Wal-Mart investor relations) or go to www.sec.gov and click "Company Filings Search" under "Filings."

Required:

What would be the effect on the financial statements if Wal-Mart were to overstate its inventory by 1%?

To determine

At the point when an ending inventory overstatement happens, the cost of goods sold is expressed excessively low, which implies that net income before taxes is exaggerated by the measure of the inventory overstatement. Be that as it may, you at that point need to settle income government expenses on the measure of the overstatement.

To discuss:

What would be the effect on the financial statement if Wal-Mart were overstate its inventory by 1%.

Explanation

At the point when an ending inventory overstatement happens, the cost of goods sold is expressed excessively low, which implies that net income before taxes is exaggerated by the measure of the inventory overstatement. Nonetheless, you at that point need to make good on income government expenses on the measure of the overstatement. In this manner, the effect of the overstatement on net income after taxes is the measure of the overstatement, less the material measure of income taxes.

Actual cost of sale before overstate = $ 360,984

Net sales 478,614
Cost of sale 360,984
Gross profit 117630

If ending inventory is overstate = $44,469 + 444

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