Question

#3 and #4

1 pts Question 3 Merchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on gross profit? gross profit is overstated no effect on gross profit not enough information to know gross profit is understated D Question 4 0.8 pts A company using the periodic system counted 700 units on hand at year-end. The following purchases were make during the first year of operations: T Jan 19 June 6 Oct 2 2,000 units purchased at $4 per unit 300 units purchased at $5 per unit 500 units purchased at S6 per unit Using the periodic system, costing by the first in, first-out method (FIFO), what is the cost of the 700 units in inventory at year-end? $2.800 58,500 $4.000 $9,700

Answer 1

Ans. 3	Option 1st
	Gross profit is overstated if ending inventory is ovrestated.
	Calculations of overstated gross profit:
	Sales	XXX
	Add: Overstated ending inventory	XXX
	Less: Net purchase	XXX
	Less: Freight in	XXX
	Less: Beginning inventory	XXX
	Gross profit overstated	XXX
Ans. 4	Option 3rd    $4,000
	Periodic FIFO:
	Date	Units	Rate	Total
	2-Oct	500	$6.00	$3,000
	6-Jun	200	$5.00	$1,000
	Ending inventory	700		$4,000
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.