Question

In: Accounting

true or false- 1. an overstatement of ending inventory will result in an understatement of net...

true or false-

1. an overstatement of ending inventory will result in an understatement of net income in the year the error occurs.

2. In a periodic system, beginning inventory plus net purchases equals cost of goods sold.

Explain reason in detail.

Solutions

Expert Solution

1) False

Net income is overstated.

Explanation:

1)Ending inventory is Credited in income statement

2)If ending inventory is overstated, gross profit would be overstated and hence net income would be overstated.

2) False

Explanation:

Beginning inventory + Net purchases = cost of goods Available for sale

Cost of goods sold is computed as fallows

                            Beginning inventory                     ****
                          Add: Net purchases                      *****
                Cost of goods available for sale          *****
                   Less: Ending inventory                       (*****)
                         Cost of goods sold                     *****


Related Solutions

An understatement of reported net income for the current year would result from a. an overstatement...
An understatement of reported net income for the current year would result from a. an overstatement of ending inventory in the previous period. b. an overstatement of ending inventory in the current period. c. failure to record accrued payroll liabilities. d. failure to record expiration of prepaid insurance.
Information: YEAR NET INCOME PER BOOKS ERROR IN ENDING INVENTORY 2013 75000 2000 OVERSTATEMENT 2014 54000...
Information: YEAR NET INCOME PER BOOKS ERROR IN ENDING INVENTORY 2013 75000 2000 OVERSTATEMENT 2014 54000 2800 UNDERSTATTEMENT 2015 96000 1900 OVERSTATEMENT No corrections were made in any year, compute the correct income for each of the three years 2013, 2014, AND 2015 (show calculations)
When auditors test liabilities, the primary risk they address is that of A. Understatement B Overstatement
When auditors test liabilities, the primary risk they address is that of A. Understatement B Overstatement
As a result of its annual inventory count, Flounder Corp. determined its ending inventory at cost...
As a result of its annual inventory count, Flounder Corp. determined its ending inventory at cost and at lower of cost and net realizable value at December 31, 2019, and December 31, 2020. December 31, 2019, was Flounder’s first year end. This information is as follows: Cost Lower of Cost and NRV Dec. 31, 2019 $ 321,700 $283,350 Dec. 31, 2020 386,000 351,250 A. Prepare the journal entries required at December 31, 2019 and 2020, assuming that the inventory is...
A topspin will result in less pressure on the bottom of the ball true or false
A topspin will result in less pressure on the bottom of the ball true or false
true or false 1.For a normal, or conventional, project, the net present value of a project...
true or false 1.For a normal, or conventional, project, the net present value of a project is positive when the required rate of the project is higher than the internal rate of return of the project. 2.Despite the easiness of calculating, payback period is not commonly used in small businesses. 3.The cash flow from old equipment that is replaced by new equipment is included in the capital budgeting calculation of cash flows from the new equipment project.
1-True or False? Ensuring that inventory transactions are recorded in the correct accounts is an example...
1-True or False? Ensuring that inventory transactions are recorded in the correct accounts is an example of the completeness assertion. 2-True or False? A capital asset sub-ledger details individual items of plant and equipment and records the cost of each asset and of any additions or alterations, and the accumulated depreciation charged against it. 3-True or False? The key issues in auditing property, plant, and equipment are ensuring that the property, plant, and equipment actually exist, are owned, and are...
True or False? 1. Merchandise inventory consists of products that a company acquires to resell to...
True or False? 1. Merchandise inventory consists of products that a company acquires to resell to customers. 2. A service company earns net income by buying and selling merchandise. 3. Gross profit is the same as gross margin. 4. Cost of goods sold is also called cost of sales. 5. A wholesaler is an intermediary that buys products from a manufacturers or other wholesalers and sells them to consumers. 6. Goods in transit are automatically included in a company's inventory...
True and False True/False Write True or False before the statement. 1. Gypsum is the brand...
True and False True/False Write True or False before the statement. 1. Gypsum is the brand name for sheetrock. 2. Coreboards and liner boards come in 2-foot widths. 3. Adhesives are not used for bonding gypsum board directly to supports. 4. Supplemental fasteners should be used with contact adhesives. 5. Gypsum panels are applied first to ceilings and then to the walls. 6. The floating angle method of drywall application omits fasteners in the corner intersection of the ceilings and...
Question 5 Alto Imports ending inventory was assigned a cost of $14,600 as a result of...
Question 5 Alto Imports ending inventory was assigned a cost of $14,600 as a result of a physical stock-take on 30 June 2020. A review of the company’s records revealed the following information: Alto Imports had recorded a $2,900 invoice (excluding GST) from a supplier for goods shipped ExW on 26 June 2020. The goods were not included in the physical inventory count because they had not yet arrived at the warehouse of Alto Imports by 30 June. Alto Imports...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT