Homework Answers
Exercise 9-52) Calculation of Corrected Net Income for Each Year (Amounts in $)
| 2011 | 2012 | 2013 | 2014 | 2015 | |
| Reported net income (loss) | 18,000 | 13,000 | 2,000 | (5,800) | 16,000 |
| Ending Inventory Overstatement | (5,500) | (3,600) | |||
| Beginning Inventory Overstatement in the next year | 5,500 | ||||
| Ending Inventory Understatement | 4,500 | 10,500 | |||
| Beginning Inventory Understatement in the next year | (4,500) | (10,500) | |||
| Corrected Net Income (Loss) | 22,500 | 3,000 | 7,500 | 4,700 | 1,900 |
Working Notes:-
1) If ending inventory is overstated, it is deducted from net income of current year and the ending inventory of current year is the beginning inventory of next year. If beginning inventory of the current year is overstated it is added to net income.
2) If ending inventory is understated, it is added to net income of current year. If beginning inventory of the current year is understated it is deducted from net income.
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