Zenkins Inc. made errors in their 2014 and 2015 recordings that affected their m
ID: 2426978 • Letter: Z
Question
Zenkins Inc. made errors in their 2014 and 2015 recordings that affected their merchandise inventory. During 2014 the ending inventory was overstated $5,000 and purchase returns & allowances for 2014 were understated $1,200. During 2015 purchases were overstated $3,500 and the ending 2015 merchandise inventory was understated $2,000. Assume that the above is the only errors made and that none of these errors were corrected during 2014 and 2015.
Required: 1) What is the dollar amount effect on the cost of goods sold and gross profit for 2014?
2) What is the dollar amount effect on gross profit and retained earnings for 2015?
Explanation / Answer
Solution :
due to ending inventory was overstated
5000
due to purchase returns & allowances for 2014 were understated
-1200
dollar amount effect on the cost of goods sold and gross profit for 2014
3800
due to purchases were overstated
-3500
due to ending 2015 merchandise inventory was understated
-2000
due to beginig inventory was overstated
-5000
dollar amount effect on gross profit and retained earnings for 2015
-10500
due to ending inventory was overstated
5000
due to purchase returns & allowances for 2014 were understated
-1200
dollar amount effect on the cost of goods sold and gross profit for 2014
3800
due to purchases were overstated
-3500
due to ending 2015 merchandise inventory was understated
-2000
due to beginig inventory was overstated
-5000
dollar amount effect on gross profit and retained earnings for 2015
-10500
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