Question

Exercise 6-12 Horner Watch Company reported the following income statement data for a 2-year period. 2013 2014 Sales revenue $211,760 $250,470 Cost of goods sold Beginning inventory Cost of goods purchased Cost of goods available for sale Ending inventory 34,510 173,520 208,030 44,100 163,930 44,100 217,220 261,320 52,830 208,490 $47,830$41,980 Cost of goods sold Gross profit Horner uses a periodic inventory system. The inventories at January 1, 2013, and December 31, 2014, are correct. However, the ending inventory at December 31, 2013, was understated $6,200. (a) Prepare correct income statement data for the 2 years. 2013 2014 Sales Cost of goods sold Beginning inventory Cost of goods purchased Cost of goods available for sale Ending inventory Cost of aoods sold

Answer 1

Income Statement
	$      2,013.00	$      2,014.00
Sales Revenue	$ 211,760.00	$ 250,470.00
Cost of Goods sold
Beginning Inventory	$    34,510.00	$    50,300.00
Cost of Goods Purchased	$ 173,520.00	$ 217,220.00
Cost of Goods Available for sale	$ 208,030.00	$ 267,520.00
Ending Inventory	$    50,300.00	$    52,830.00
Cost of Goods sold	$ 157,730.00	$ 214,690.00
Gross Profit	$    54,030.00	$    35,780.00

Cumulative effect of Inventory error on total gross profit for the 2nd year					$           -
Since gross profit of year 1 was Understated and Gross profit of Year 2 was overstated with the same amount, the cumulative effect is nil.