Question

Splish Brothers Inc. reported the following income statement data for a 2-year period.

		2018		2019
Sales revenue		$211,500		$257,000
Cost of goods sold
Beginning inventory		35,000		44,000
Cost of goods purchased		192,500		216,000
Cost of goods available for sale		227,500		260,000
Ending inventory		44,000		54,500
Cost of goods sold		183,500		205,500
Gross profit		$28,000		$51,500

Splish Brothers Inc. uses a periodic inventory system. The inventories at January 1, 2018, and December 31, 2019, are correct. However, the ending inventory at December 31, 2018, was overstated $5,000.

Prepare correct income statement data for the 2 years.

		2018		2019
Sales		$enter a dollar amount		$enter a dollar amount
Cost of goods sold
Beginning inventory		enter a dollar amount		enter a dollar amount
Cost of goods purchased		enter a dollar amount		enter a dollar amount
Cost of goods available for sale		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts
Ending inventory		enter a dollar amount		enter a dollar amount
Cost of goods sold		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts
Gross profit		$enter a total amount		$enter a total amount

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

Cumulative effect of the inventory error ($enter the Cumulative effect of the inventory error in dollars).

Answer 1

2018 $ 211,500 2019 $257,000 Sales Cost of goods sold Beginning inventory Cost of Goods Purchased Cost of Goods Available for Sale Ending Inventory Cost of goods Sold Gross Profit $ 35,000 $ 192,500 $ 227,500 $ 39,000 $ 188,500 $ 23,000 $ 39,000 $216,000 $255,000 $ 54,500 $ 200,500 $ 56,500 Cumulative effect of the inventory error ISO Working Notes: Ending Inventory 2018 = $44,000-$5,000 = $39,000 Cumulative effect of the inventory error on total gross profit for the 2 years Gross Profit Before adjustment of Error ($28,000+$51,500) $ 79,500 Gross Profit after adjustment of Error ($23,000+$56,500) S 79,500 Diffrence Cumulative effect S -