A firm counting its inventory overlooked a box in the basement with a value of $1000...
A firm counting its inventory overlooked a box in the basement with a value of $1000 in year 1. The following year it forgot to count the box again. How will this affect the financial statements? Give your answer in the format “U amount” or “O amount.” For example, if your answer is that something is understated by $3000, you would enter U 3000.
How did this affect retained earnings in year 1?
How did this affect year 2’s net income?
How did this affect year 2’s retained earnings?
Homework Answers
Solution:
Retained earnings - Year 1 = U $1,000
Year 2 net income = No effect because same is not counted in beginning and ending inventory both.
Retained earnings - Year 2 = U $1,000
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A firm counting its inventory overlooked a box in the basement with
a value of $1000...
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A firm counting its inventory did not count a box with a value of $1000 in year 1. In year 2, the firm forgot to count the same box with a value of $1000. State whether it is understated, over stated , or has no effect. How did this affect retained earnings in year 1? How did this affect net income in year 2 ? How did this affect retained earnings in year 2 ?
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