Navajo Company’s financial statements show the following. The
company recently discovered that in making physical counts of
inventory, it had made the following errors: Year 1 ending
inventory is understated by $67,000, and Year 2 ending inventory is
overstated by $37,000.
For Year Ended December 31 | Year 1 | Year 2 | Year 3 | ||||
(a) | Cost of goods sold | $ | 742,000 | $ | 972,000 | $ | 807,000 |
(b) | Net income | 285,000 | 292,000 | 267,000 | |||
(c) | Total current assets | 1,264,000 | 1,377,000 | 1,247,000 | |||
(d) | Total equity | 1,404,000 | 1,597,000 | 1,262,000 | |||
Required:
1. For each key financial statement
figure—(a), (b), (c), and (d)
below—prepare a table to show the adjustments necessary to correct
the reported amounts.
2. What is the total error in combined net income
for the three-year period resulting from the inventory errors?
A) Cost of Goods Sold: | Year-1 | Year-2 | Year-3 | |
Reported Amount | $742,000 | $972,000 | $807,000 | 2521000 |
Adjustments for | ||||
December year-1 error | -$67,000 | $67,000 | ||
December Year-2 error | $37,000 | -$37,000 | ||
Corrected Amount | $675,000 | $1,076,000 | $770,000 | 2521000 |
B) Net Income | Year-1 | Year-2 | Year-3 | |
Reported Amount | $285,000 | $292,000 | $267,000 | 844000 |
Adjustments for | ||||
December Year-1 error | $67,000 | -$67,000 | ||
December Year-2 error | -$37,000 | $37,000 | ||
Corrected Amount | $352,000 | $188,000 | $304,000 | 844000 |
C) Total Current Assets: | Year-1 | Year-2 | Year-3 | |
Reported Amount | $1,264,000 | $1,377,000 | $1,247,000 | 3888000 |
Adjustments for | ||||
December Year-1 error | $67,000 | |||
December Year-2 error | -$37,000 | |||
Corrected Amount | $1,331,000 | $1,340,000 | $1,247,000 | 3918000 |
D) Total Equity | Year-1 | Year-2 | Year-3 | |
Reported Amount | $1,404,000 | $1,597,000 | $1,262,000 | 4263000 |
Adjustments for | ||||
December Year-1 error | $67,000 | |||
December Year-2 error | -$37,000 | |||
Corrected Amount | $1,471,000 | $1,560,000 | $1,262,000 | 4293000 |
There is no change in the combined net income of 3 years as can be seen from calculation B. |
Navajo Company’s financial statements show the following. The company recently discovered that in making physical counts...
Navajo Company’s financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory is understated by $66,000, and Year 2 ending inventory is overstated by $36,000. For Year Ended December 31 Year 1 Year 2 Year 3 (a) Cost of goods sold $ 741,000 $ 971,000 $ 806,000 (b) Net income 284,000 291,000 266,000 (c) Total current assets 1,263,000 1,376,000 1,246,000 (d) Total equity 1,403,000...
Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory is understated by $59,000, and Year 2 ending inventory is overstated by $29,000 Tor Year Ended December 31 (a) Cost of goods sold (b) Net income (c) Total current assets (d) Total equity Year Year 2 734,000 $ 964,000 277.000 284,000 1,256,000 1,369,000 1,396,000 1,589,000 Year 3 799,000 259.000 1,239,000 1,254,000 Required:...
Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2017, is understated by $52,000, and inventory on December 31, 2018, is overstated by $22,000. For Year Ended December 31 (a) Cost of goods sold (b) Net income Total current assets (d) Total equity 2017 $ 727,000 270,000 1,249,000 1,389,000 2018 $ 957,000 277,000 1,362,000 1,582,000 2019 $ 792,000 252,000 1,232,000 1,247,000...
Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory, is understated by $56,000 and Year 2 ending inventory, is overstated by $20,000. $ $ $ For Year Ended December 31 (a) Cost of goods sold (b) Net income (c) Total current assets (d) Total equity Year 1 615,000 230,000 1,255,000 1,387,000 Year 2 957,000 285,000 1,365,000 1,530,000 Year 3 780,000 241,000...
Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory is understated by $51,000, and Year 2 ending inventory is overstated by $21,000. $ $ $ For Year Ended December 31 (a) Cost of goods sold (b) Net income (c) Total current assets (d) Total equity Year 1 726,000 269,000 1,248,000 1,388,000 Year 2 956,000 276,000 1,361,000 1,581,000 Year 3 791,000 251,000...
Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory is understated by $63,000, and Year 2 ending inventory is overstated by $33,000. $ $ For Year Ended December 31 (a) Cost of goods sold (b) Net income (c) Total current assets (d) Total equity Year 1 738,000 281,000 1,260,000 1,400,000 Year 2 Year 3 968,000 $ 803,000 288,000 263,000 1,373,000 1,243,000...
Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2017, is understated by $51,000, and inventory on December 31, 2018, is overstated by $21,000. For Year Ended December 31 2017 2018 2019 Cost of (a) goods $ 726,000 $ 956,000 $ 791,000 sold Net 269,000 276,000 251,000 Total (c) current 1,248,000 1,361,000 1,231,000 assets (a) equity 1,388,000 1,581,000 1,246,000 (b) income...
#7 chapter 5Navajo Company’s financial statements show
the following. The company recently discovered that in making
physical counts of inventory, it had made the following errors:
Year 1 ending inventory is understated by $54,000, and Year 2
ending inventory is overstated by $24,000.
Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory is understated by $54,000, and Year 2 ending inventory...
Chapter 05 Homework Saved Navajo Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2017, is understated by $58,000, and inventory on December 31, 2018, is overstated by $28,000. points For Year Ended December 31 (a) Cost of goods sold (b) Net income (C) Total current assets (d) Total equity 2017 $ 733,000 276,000 1,255,000 1,395,000 2018 $ 963,000 283,000 1,368,000 1,588,000...
Nash Tool Company’s December 31 year-end financial statements
contained the following errors.
December 31, 2017
December 31, 2018
Ending inventory
$9,000 understated
$8,000 overstated
Depreciation expense
$2,300 understated
—
An insurance premium of $69,600 was prepaid in 2017 covering the
years 2017, 2018, and 2019. The entire amount was charged to
expense in 2017. In addition, on December 31, 2018, fully
depreciated machinery was sold for $15,900 cash, but the entry was
not recorded until 2019. There were no other...