Exercise 8-26 The net income per books of Linda Patrick Company was determined w

Question

Exercise 8-26 The net income per books of Linda Patrick Company was determined without knowledge of the errors indicated below Net Income Error in Ending Year per Books 2012 2013 2014 2015 2016 2017 Inventory $50,000 52,000 54,000 56,000 58,000 60,000 Overstated $ 3,000 Overstated Understated 11,000 No error Understated 2,000 Overstated 9,000 8,000 Prepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventory errors Errors in Inventories Net Income Overstatement Understatement Overstatement Understatement Corrected Net Year Per Books 2012 2013 2014 2015 2016 2017 Jan. 1 Jan. 1 Dec. 31 Dec. 31 Income $50,000 52,000 54,000 56,000 58,000 60,000

Explanation / Answer

Opening. Closing

Corrected net income =$344000

Notes

1) over stating of closing stock increases the net income so you reduce that over stated amount from net income  

2)understating of closing stock that decreases net income so you add that much amount to the net income

3)overstating of opening stock decreases the net income so add that much amount to the net income

4)understating of opening stock increases net income so you can deduct the that amount from net income

5) closing stock of the Dec 31 is becomes opening stock to the Jan 1

Thank you...

Year net income overstatement jan1 understament jan1 over statement dec31 Understatement dec31 Corrected net income 2012 $50000 $3000 $47000 2013 $52000 $3000 $9000 $46000 2014 $54000 $9000 $11000 $74000 2015 $56000 $11000 $67000 2016 $58000 $2000 $60000 2017 $60000 $2000 $8000 $50000

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