Rulix Watch agency reported the following income explain data because that a 2-year period.

You are watching: What is the cumulative effect of the inventory error on total gross profit for the 2 years?

 2013 2014 Sales revenue \$220,000 \$250,000 Cost of items sold Beginning inventory 32,000 44,000 Cost of products purchased 173,000 202,000 Cost that goods available for sale 205,000 246,000 Ending inventory 44,000 52,000 Cost of goods sold 161,000 194,000 Gross profit \$ 59,000 \$ 56,000

Rulix offers a periodic inventory system. The inventories at January 1, 2013, and also December 31, 2014, space correct. However, the ending inventory in ~ December 31, 2013, was overstated \$6,000.

Instructions

(a) Prepare correct income statement data for the 2 years.

(b) What is the cumulative result of the perform error on full gross profit for the 2 years?

(c) define in a letter to the chairman of Rulix Watch firm what has actually happened, i.e., the nature of the error and also its impact on the gaue won statements.

Jan 27 2021 05:41 PM

Sanjeet kanswered ~ above January 29, 2021
SOLUTION:-Ending inventory in ~ December 31, 2018 is overstated by \$6000.It should have been \$38000 (instead of offered amount that \$44000). As soon as we correct this error, the will result in palliation of gross profit by \$6000. Brand-new gross profit in 2018 will certainly be \$53000.When the ending inventory in ~ December 31, 2018 is overstated by \$6000, it will certainly mean...
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