Question
In: Accounting
Navajo Company’s financial statements show the following. The company recently discovered that in making physical counts...
Navajo Company’s financial statements show the following. The
company recently discovered that in making physical counts of
inventory, it had made the following errors: Year 1 ending
inventory is understated by $59,000, and Year 2 ending inventory is
overstated by $29,000.
| For Year Ended December 31 | Year 1 | Year 2 | Year 3 | ||||
| (a) | Cost of goods sold | $ | 734,000 | $ | 964,000 | $ | 799,000 |
| (b) | Net income | 277,000 | 284,000 | 259,000 | |||
| (c) | Total current assets | 1,256,000 | 1,369,000 | 1,239,000 | |||
| (d) | Total equity | 1,396,000 | 1,589,000 | 1,254,000 | |||
Required:
1. For each key financial statement
figure—(a), (b), (c), and (d)
below—prepare a table to show the adjustments necessary to correct
the reported amounts.
2. What is the total error in combined net income
for the three-year period resulting from the inventory errors?
Complete this question by entering your answers in the tabs below.
- Required 1
- Required 2
What is the error in total net income for the combined three-year period resulting from the inventory errors?
|
Solutions
Expert Solution
| Cost of goods sold: | Year 1 | Year 2 | Year 3 |
| Reported amount | $7,34,000 | $9,64,000 | $7,99,000 |
| Adjustments for: | |||
| Year 1 error | -$59,000 | $59,000 | $0 |
| Year 2 error | $0 | $29,000 | -$29,000 |
| Corrected amount | $6,75,000 | $10,52,000 | $7,70,000 |
| Net Income: | Year 1 | Year 2 | Year 3 |
| Reported amount | $2,77,000 | $2,84,000 | $2,59,000 |
| Adjustments for: | |||
| Year 1 error | $59,000 | $59,000 | $0 |
| Year 2 error | $0 | -$29,000 | $29,000 |
| Corrected amount | $3,36,000 | $3,14,000 | $2,88,000 |
| Current Assets: | Year 1 | Year 2 | Year 3 |
| Reported amount | $12,56,000 | $13,69,000 | $12,39,000 |
| Adjustments for: | |||
| Year 1 error | $59,000 | $59,000 | $0 |
| Year 2 error | $0 | -$29,000 | -$29,000 |
| Corrected amount | $13,15,000 | $13,99,000 | $12,10,000 |
| Total equity: | Year 1 | Year 2 | Year 3 |
| Reported amount | $13,96,000 | $15,89,000 | $12,54,000 |
| Adjustments for: | |||
| Year 1 error | $59,000 | $59,000 | $0 |
| Year 2 error | $0 | -$29,000 | -$29,000 |
| Corrected amount | $14,55,000 | $16,19,000 | $12,25,000 |
| Total error in Net Income is understatement of $30,000 | |||
ekkarill92 answered 1 year agoRelated Solutions
Navajo Company’s financial statements show the following. The company recently discovered that in making physical counts...
Navajo Company’s financial statements show the following. The
company recently discovered that in making physical counts of
inventory, it had made the following errors: Year 1 ending
inventory is understated by $59,000, and Year 2 ending inventory is
overstated by $29,000.
For Year Ended December 31
Year 1
Year 2
Year 3
(a)
Cost of goods sold
$
734,000
$
964,000
$
799,000
(b)
Net income
277,000
284,000
259,000
(c)
Total current assets
1,256,000
1,369,000
1,239,000
(d)
Total equity
1,396,000...
Navajo Company’s financial statements show the following. The company recently discovered that in making physical counts...
Navajo Company’s
financial statements show the following. The company recently
discovered that in making physical counts of inventory, it had made
the following errors: Inventory on December 31, 2015, is
understated by $63,000, and inventory on December 31, 2016, is
overstated by $33,000.
For
Year Ended December 31
2015
2016
2017
(a)
Cost of goods sold
$
738,000
$
968,000
$
803,000
(b)
Net income
281,000
288,000
263,000
(c)
Total current
assets
1,260,000
1,373,000
1,243,000
(d)
Total
equity
1,400,000
1,593,000...
Navajo Company’s financial statements show the following. The company recently discovered that in making physical counts...
Navajo Company’s financial statements show the following. The
company recently discovered that in making physical counts of
inventory, it had made the following errors: Inventory on December
31, 2016, is understated by $56,000, and inventory on December 31,
2017, is overstated by $26,000.
For Year Ended December 31
2016
2017
2018
(a)
Cost of goods sold
$
731,000
$
961,000
$
796,000
(b)
Net income
274,000
281,000
256,000
(c)
Total current assets
1,253,000
1,366,000
1,236,000
(d)
Total equity
1,393,000
1,586,000...
Financial Statements: a. Financial accountants are responsible for preparing the company’s financial statements that will be...
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potential investors. As a result, these three statements are
considered an indicator of a business’s financial health. Identify
the three key financial statements that corporations are required
to prepare, and describe the type of information found on each.
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2007
2008
Rs.
Rs.
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200,000
160,000
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2,160,000
Prepaid Expenses
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12,000...
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(top to bottom), not in side-by-side columns? a. Statement of
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Statement of Cash Flows d. Statement of Income e. All of these
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The following material points are unsolved:
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trade receivables were uncollectible.
b. Land is measured using the revaluation model. In February
2018, the company received confirmation that land has a fair value
increase of $10,500 million at 31 December 2017. Land is not
subject to depreciation.
c. The balance on current tax...
Krafty Kris, Inc., discovered the following errors after the 2017 financial statements were issued: a. A...
Krafty Kris, Inc., discovered the following errors after the
2017 financial statements were issued:
a. A major supplier shipped inventory valued at $8,550 to Krafty
Kris on consignment. This merchandise was mistakenly included in
the inventory taken by Krafty Kris on December 31, 2016. (Goods
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not have been included in Krafty Kris's inventory.)
b. Krafty Kris renewed its liability insurance policy on October
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During 2024, Passage Company discovered that the ending inventories reported on its financial statements were incorrect...
During 2024, Passage Company discovered that the ending
inventories reported on its financial statements were incorrect by
the following amounts:
2022
$60,000 understated
2023
$75,000 overstated
Prior to any adjustments for these errors, 2023 Net Income would
be:
Select one:
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b. $75,000 overstated
c. $15,000 overstated
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Financial Statement Analysis The financial statements of Gelato Corporation show the following information: Statement of Financial...
Financial Statement Analysis
The financial statements of Gelato Corporation show the
following information:
Statement of Financial Position
December 31, 2020
Assets 2020 2019
Cash $257,000 $263,000
Accounts receivable 128,000 163,000
Fair value through net income investments 120,000 119,000
Inventory 320,000 361,000
Plant assets (net) 398,000 418,500
Intangible assets 102,000 128,500
Total Assets $1,325,000 $1,453,000
Liabilities and Equity
Accounts payable $240,000 $303,500
Long-term debt 60,000 137,500
Share capital 293,000 293,000
Retained earnings 732,000 719,000
Total Liabilities and equity
$1,325,000 $ 1,453,000...
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