Asked by Maricarmen Fierros on Jun 12, 2024
Verified
James Supply Company reports net income of $120000 in 2016. The ending inventory did not include goods valued at $9000 that James had consigned to Eli's Gift Shop.
(1) What is the correct net income for 2016?
(2) What impact will this error have on the balance sheet at 12/31/16?
Consigned Goods
Items that are given to a third party to sell but remain the property of the seller until sold.
Net Income
The total earnings of a company after subtracting all expenses, taxes, and losses from its total revenues, indicating its profitability.
- Fix misstated net income due to inventory count errors and analyze impact on financial statements.
Verified Answer
AC
Amazon CueenJun 18, 2024
Final Answer :
(1) If ending inventory is understated by $9000 cost of goods sold will be overstated and net income will be understated by $9000. The correct net income is $129000.
(2) On the balance sheet both inventory and owner's equity will be understated by $9000.
(2) On the balance sheet both inventory and owner's equity will be understated by $9000.
Learning Objectives
- Fix misstated net income due to inventory count errors and analyze impact on financial statements.
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