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partial income statements for Sherwood company summarized for a four year period show the following 2015...

partial income statements for Sherwood company summarized for a four year period show the following

2015    2016 2017 2018

net sales    2,200.000    2,600.000    2,700.000 3,200.000

cost of goods sold    1,496.000    1,742.000    1,863.000 2,176.000

gross profit 704.000 858.000 837.000 1,024.000

an audit reveled that in determining these amounts, the ending inventory for 2016 was overstated by $22,000. the inventory balance on December 31, 2017. was accurately stated. the company uses a periodic inventory system

1\ restate the partial income statements to reflect the correct amounts after fixing the inventory error

2\ compute the gross profit percentage for each year (a) before the correction and (b) after the correction

2.a\ does the pattern of gross profit percentage lend confidence to your corrected amount

Solutions

Expert Solution

Gross profit is calculated by deducting cost of goods sold from the sales. The gross profit changes with the change in sales activity or cost of goods sold. The gross profit percentage is calculated by diving the sales to gross profit of the company.The operating expenses are deducted from the gross profit to get operating profit or operating income.

ekkarill92 answered 1 hour ago
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