Web2) The understatement of ending inventory in 2024 will leads to computing COGS at a higher amount thus would understate your income. Since your ending inventory is understated, in the beginning balance of inventory in 2024 will be also understated thus your COGS will be much lower thus would overstate your income for 2024. WebThis was also omitted from the ending inventory in 2024, and remained unsold at the end of 2024. This error will result in an understatement of net income for both 2024 and 2024, as the merchandise should have been recorded in order to accurately reflect the company's financial position.
6.4: Impacts of Inventory Errors on Financial Statements
WebUnderstatement of ending inventory 25,000 30,000 Overstatement of ending inventory 16,000 Omission of the following: Prepaid insurance 7,500 10,000 Unearned rent income 8,000 Accrued salaries expense 12,000 10,000 Accrued interest revenue 2,000 3,000 Erroneous capitalization of machinery repairs 15,000 Overstatement of machinery … WebThis error results in the omission of the merchandise from the company's ending inventory in 2024 and its remaining unsold at the end of 2024. As a result, the cost of goods sold is understated, which leads to an overstatement of net income. The fourth error is the failure to record accrued interest on notes payable in 2024. images of gupta empire
Int. Accounting 1 - INTERMEDIATE ACCOUNTING PROBLEM 16
WebRequired information Exercise 6-20A Find financial statement effects of understatement in ending inventory (L06-9) (The following information applies to the questions displayed below.) Mulligan Corporation purchases inventory on … WebAn understatement of the ending inventory in Year 1, if not corrected, will cause which of the following? Group of answer choices A)The year 1 net income to be understated and Year 2 net income will be unaffected. B)The year 1 net income to be overstated and Year 2 net income to be overstated. WebOct 2, 2024 · If the ending inventory is overstated, cost of goods sold is understated, resulting in an overstatement of gross margin and net income. Also, overstatement of … images of gurpurab