Explore Westonci.ca, the premier Q&A site that helps you find precise answers to your questions, no matter the topic. Get immediate and reliable solutions to your questions from a community of experienced experts on our Q&A platform. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts.
Sagot :
Answer:
1. The corrected gross profit are as follows:
2015 = $704,000
2016 = $836,000
2017 = $859,000
2018 = $1,024,000
2-a  Gross profit percentage before and after correction are as follows: Â
Particulars         2015   2016    2017    2018
Before correction    32%    33%     31%     32%
After correction     32%    32%     32%     32%
2-b. Yes. This is because the gross profit percentage for the years are approximately the same at 32% after the correction was made.
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
Partial income statements for Sherwood Company summarized for a four-year period show the following:
             2015       2016          2017          2018
Net Sales   $2,200,000  $2,600,000   $2,700,000    $3,200,000
COGS Â Â Â Â Â Â 1,496,000 Â Â Â Â 1,742,00 Â Â Â Â 1,863,000 Â Â Â Â 2,176,000
Gross Profit   $704,000    $858,000    $837,000    $1,024,000
An audit revealed that in determining these amounts, the ending inventory for 2016 was overstated by $22.000. The inventory balance on December 31, 2017, was accurately stated. The company uses a periodic inventory system.
Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error, 2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction 2-b. Does the pattern of gross profit percentages lend confidence to your corrected amounts?
The explanation of the answer is now given as follows:
1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error
Note: See the attached excel file for the fixing the inventory error and the restated partial income statements to reflect the correct amounts, after fixing the inventory error.
The effect of the overstatement of closing inventory is reducing the 2016 cost of goods sold. To correct this in the attached excel file, the opening balance is reduced by $22,000 and this makes cost of goods sold of 2016 to increase and the cost of goods sold of 2017 to decrease by $22,000.
2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction
Note: See the attached excel file for the computed the gross profit percentage for each year (a) before the correction and (b) after the correction.
In the attached excel file, the following formula is used:
Gross Profit percentage = Gross profit / Net Sales) * 100
2-b. Does the pattern of gross profit percentages lend confidence to your corrected amounts?
Yes. This is because the gross profit percentage for the years are approximately the same at 32% after the correction was made.
Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. Thank you for visiting Westonci.ca, your go-to source for reliable answers. Come back soon for more expert insights.
