Vibrant Company had $1,050,000 of sales in each of three consecutive years 2016–2018, and it purchased merchandise costing $575,000 in each of those years. It also maintained a $350,000 physical inventory from the beginning to the end of that three-year period. In accounting for inventory, it made an error at the end of year 2016 that caused its year-end 2016 inventory to appear on its statements as $330,000 rather than the correct $350,000.
1. Determine the correct amount of the
company’s gross profit in each of the years 2016–2018.
2. Prepare comparative income statements to show
the effect of this error on the company's cost of goods sold and
gross profit for each of the years 2016−2018.
Homework Answers
1. Correct Amount of Gross Profit for year 2016, 2017 & 2018
| Particular | 2016 | 2017 | 2018 |
| Total Sales | $1050000 | $1050000 | $1050000 |
| Less: Cost of Goods Sold | |||
| Opening Stock | $350000 | $350000 | $350000 |
| Add: Purchase | $575000 | $575000 | $575000 |
| Less: Closing Stock | $350000 | $350000 | $350000 |
| Cost of Goods Sold | $575000 | $575000 | $575000 |
| Gross Profit | $475000 | $475000 | $475000 |
2. Comparative Statement: Year 2016, 2017 & 2018:
| Particular | 2016 | 2017 | 2018 |
| Total Sales | $1050000 | $1050000 | $1050000 |
| Less: Cost of Goods Sold | |||
| Opening Stock | $350000 | $330000 | $350000 |
| Add; Purchase | $575000 | $575000 | $575000 |
| Less: Closing Stock | $330000 | $350000 | $350000 |
| Cost of Goods Sold | $595000 | $555000 | $575000 |
| Gross Profit | $455000 | $495000 | $475000 |
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hapter 05 Pre But Problems X C Get Homework Help With Chego X G Hemming uses a perpetual inver X OX Sign out @ sources - Google Docs W newconnect.mheducation.com/flow/connect.html Chapter 05 Pre-Built Problems Help Save & Exit Submit Check my work Part 1 of 4...
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costing methods. For specific identification, the March 9 sale
consisted of 100 units from beginning inventory and 230 units from
the March 5 purchase; the March 29 sale consisted of 80 units from
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hapter 05 Pre But Problems X C Get Homework Help With Chego X G Hemming uses a perpetual inver X OX Sign out...
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