Question

In: Accounting

Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies...

Effect of Errors in Physical Inventory

Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y1, Fonda incorrectly counted its inventory as $315,840 instead of the correct amount of $303,210.

Enter all amounts as positive numbers.

a. State the effects of the error on the December 31, 20Y1, balance sheet of Fonda Motorcycle Shop.

Balance Sheet Items Overstated / Understated Amount
Inventory $
Current Assets $
Total Assets $
Stockholders’ Equity $

b. State the effects of the error on the income statement of Fonda Motorcycle Shop for the year ended December 31, 20Y1.

Income Statement Items Overstated / Understated Amount
Cost of Goods Sold $
Gross Profit $
Net Income $

c. If uncorrected, what would be the effects of the error on the 20Y2 income statement?

Income Statement Items Understated / Overstated Amount
Cost of Goods Sold $
Gross Profit $
Net Income $

d. If uncorrected, what would be the effects of the error on the December 31, 20Y2, balance sheet?

The December 31, 20Y2, balance sheet would be correct, since the 20Y1 inventory error reverses itself in 20Y2.

In the December 31, 20Y2, balance sheet, inventory would be understated.

In the December 31, 20Y2, balance sheet, inventory would be overstated.

In the December 31, 20Y2, balance sheet, retained earnings would be understated.

Solutions

Expert Solution

a. Balance Sheet Items Overstated/Understated Amount
Inventory Overstated $       12,630
Current assets Overstated $       12,630
Total assets Overstated $       12,630
Stockholders' equity Overstated $       12,630
b. Income Statement Items Overstated/Understated Amount
Cost of goods sold Understated $       12,630
Gross profit Overstated $       12,630
Net income Overstated $       12,630
c. Income Statement Items Overstated/Understated Amount
Cost of goods sold Overstated $       12,630
Gross profit Understated $       12,630
Net income Understated $       12,630

d. The December 31, 20Y2, balance sheet would be correct, since the 20Y1 inventory error reverses itself in 20Y2.


Related Solutions

Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies...
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y1, Fonda incorrectly counted its inventory as $391,780 instead of the correct amount of $376,110. Enter all amounts as positive numbers. a. State the effects of the error on the December 31, 20Y1, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated / Understated Amount Inventory $ Current Assets $ Total...
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies...
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y1, Fonda incorrectly counted its inventory as $297,480 instead of the correct amount of $285,580. Enter all amounts as positive numbers. a. State the effects of the error on the December 31, 20Y1, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated/Understated Amount Inventory $ Current Assets $ Total Assets $...
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies...
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y8, Fonda Motorcycle Shop incorrectly counted its inventory as $210,730 instead of the correct amount of $202,300. Enter all amounts as positive numbers. a. State the effect of the error on the December 31, 20Y8, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated / Understated Amount Merchandise Inventory $ Current...
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies...
Effect of Errors in Physical Inventory Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y1, Fonda incorrectly counted its inventory as $302,120 instead of the correct amount of $290,040. Enter all amounts as positive numbers. a. State the effects of the error on the December 31, 20Y1, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated / Understated Amount Inventory Overstated $ Current Assets Overstated...
Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of...
Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y8, Fonda Motorcycle Shop incorrectly counted its inventory as $189,550 instead of the correct amount of $181,970. Enter all amounts as positive numbers. a. State the effect of the error on the December 31, 20Y8, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated / Understated Amount Merchandise Inventory $ Current Assets $ Total Assets $ Owner's...
Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of...
Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y8, Fonda Motorcycle Shop incorrectly counted its inventory as $329,980 instead of the correct amount of $316,780. Enter all amounts as positive numbers. a. State the effect of the error on the December 31, 20Y8, balance sheet of Fonda Motorcycle Shop. Balance Sheet Items Overstated/Understated Amount Merchandise Inventory $ Current Assets Total Assets Owner's Equity b. State the...
effect of Errors in Physical Inventory Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and...
effect of Errors in Physical Inventory Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y8, Madison incorrectly counted its inventory as $773,020 instead of the correct amount of $796,210. Enter all amounts as positive numbers. a. State the effects of the error on the December 31, 20Y8, balance sheet of Madison River Supply. Balance Sheet Items Understated/Overstated Amount Inventory $ Current Assets $ Total Assets...
Effect of Errors in Physical Inventory Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and...
Effect of Errors in Physical Inventory Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y8, Madison incorrectly counted its inventory as $546,910 instead of the correct amount of $563,320. Enter all amounts as positive numbers. a. State the effects of the error on the December 31, 20Y8, balance sheet of Madison River Supply. Balance Sheet Items Understated/Overstated Amount Inventory $ Current Assets $ Total Assets...
Effect of Errors in Physical Inventory Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and...
Effect of Errors in Physical Inventory Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $722,640 instead of the correct amount of $744,320. Enter all amounts as positive numbers. a. State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply. Balance Sheet Items Understated/Overstated Amount Merchandise Inventory $ Current Assets...
Effect of Errors in Physical Inventory Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and...
Effect of Errors in Physical Inventory Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y8, Madison incorrectly counted its inventory as $623,730 instead of the correct amount of $642,440. Enter all amounts as positive numbers. a. State the effects of the error on the December 31, 20Y8, balance sheet of Madison River Supply. Balance Sheet Items Understated/Overstated Amount Inventory $ Current Assets $ Total Assets...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT