Print Ponda Motorcycle Shop selis motorcycles, ATVs, and other related supplies

Question

Print Ponda Motorcycle Shop selis motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20YB, Fonda Motorcycle Shop incerrectly counted its inventory as $353,680 instead of the cormect amount of $339,530 Enber all amounts as positive numbers. a. State the effect of the error on the December 31, 0 blance sheet of Fonda Motorcycle Shop. Owner's Equity )b. State the effect of the emer on the income statement of Fonda Motoryde Shop for the year ended December 31, 2ors. Gross Proflt Net Income c. uncorrected, what would be the effect of the error on the 20enceme statement? Income Statement Items Amount Gross Proft Net Income d. uncorrectea, what would bene «mea or the error on the December 31, aors, balance sheet, 1. The December 31, 20rs, salance sheet would be correct, sance the 20YB unventory error reverses nser n 2or9. 2 more Check My work uses semaining Previou MacBook Air 80,

Explanation / Answer

Req a: Balance sheet items Merchandise inventory Overstated 14150 Current assets Overstated 14150 Total Assets Overstated 14150 Owner's equity Overstated 14150 Req b: Income Statement Items Cost of Merchandise sold Understated 14150 Gross profit Overstated 14150 Net profit Overstated 14150 Req c: Income Statement items Cost of Merchandise sold Overstated 14150 Gross profit Understated 14150 Net profit Understated 14150 Req d: Answer is 1. Dec 31 20Y9, the Balance sheet would be correct since the 20Y8 inventory error reverses itself in 20Y9.

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