Question

Exercise 8-26

The net income per books of Concord Company was determined without knowledge of the errors indicated below.

Year		Net Income per Books		Error in Ending Inventory
2012		$45,200		Overstated		$ 3,180
2013		47,370		Overstated		9,890
2014		49,310		Understated		10,640
2015		51,140		No error
2016		53,040		Understated		2,030
2017		55,060		Overstated		7,750

Prepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventory errors. Recall that ending inventory from one year becomes beginning inventory in the next year.

Answer 1

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	Overstated Ending Inventory	=	Overstated Income
	Overstated Begining Inventory	=	Understated Income
	Understated Ending Inventory	=	Understated Income
	Understated Begining Inventory	=	Overstated Income
			2012	2013	2014	2015	2016	2017
	Net Income as per books		$                          45,200	$       47,370	$       49,310	$       51,140	$       53,040	$       55,060
	Less: Overstated Ending Inventory		$                           -3,180	$        -9,890				$        -7,750
	Add: Understated Ending Inventory				$       10,640		$         2,030
	Add: Overstated Beginning Inventory			$         3,180	$         9,890
	Less: Understated Beginning Inventory					$     -10,640		$        -2,030
	Corrected Net Income		$                          42,020	$       40,660	$       69,840	$       40,500	$       55,070	$       45,280