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Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $233,400 instead of the correct amount of $238,600. a. State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply. b. State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2. c. If uncorrected, what would be the effect of the error on the 20Y3 income statement? d. If uncorrected, what would be the effect of the error on the December 31, 20Y3, balance sheet?

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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Chapter
Section
BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 7, Problem 17E
Textbook Problem
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Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $233,400 instead of the correct amount of $238,600.

  1. a. State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply.
  2. b. State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2.
  3. c. If uncorrected, what would be the effect of the error on the 20Y3 income statement?
  4. d. If uncorrected, what would be the effect of the error on the December 31, 20Y3, balance sheet?

(a)

To determine

Indicate the effect of misstatement on MRS Company in their balance sheet.

Explanation of Solution

Inventory error: Inventory errors are sometimes caused by making mistake, in physical count, in pricing the inventory correctly, or in recognizing the transfer of title for the goods in transit. These inventory errors affect both the income statement as well as the balance sheet...

(b)

To determine

Indicate the effect of misstatement on MRS Company in their income statement.

(c)

To determine

Indicate the effect on MRS Company in their income statement on the next year if the mistake is uncorrected.

(d)

To determine

Indicate the effect on MRS Company in their balance sheet on the next year if the mistake is uncorrected.

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Chapter 7 Solutions

Financial Accounting
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