At the beginning of Year 1, the company’s inventory level was stated correctly. At the end...
At the beginning of Year 1, the company’s inventory level was stated correctly. At the end of
Year 1, inventory was understated by $2,000. At the end of Year 2, inventory was overstated by
$450. Reported net income was $3,000 in Year 1 and $3,000 in Year 2.
The correct amount of net income in Year 2 is
Homework Answers
At the end of year 1, inventory was understated by $2,000 so, net income was understated by $2000. so increase net income by $2,000 then Net income for year 1 will become $5,000.
At the end of year 2, Inventory was overstated, it means Net income was overstated by $450. so to rectify the mistake reduce net income by $450 the Net income = $2,550
So, the correct amount of net income in year 2 is $2,550
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