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

1 authorized Answer


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Sanjeet kanswered ~ above January 29, 2021
5Ratings,(21 Votes)
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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