Practice: A company had an ending inventory that was overstated by $5,000 due to a miscount during the year-end inventory count. The amounts reflected in the end of the period balance sheet are:
| Sections | |||
|---|---|---|---|
| Merchandising Company vs. Manufacturing Company | 6 mins | 0 completed | Learn |
| Physical Inventory Count, Ownership of Goods, and Consigned Goods | 11 mins | 0 completed | Learn |
| Specific Identification | 8 mins | 0 completed | Learn |
| Periodic Inventory - FIFO, LIFO, and Average Cost | 23 mins | 0 completed | Learn |
| Perpetual Inventory - FIFO, LIFO, and Average Cost | 31 mins | 0 completed | Learn |
| Financial Statement Effects of Inventory Costing Methods | 11 mins | 0 completed | Learn |
| Lower of Cost or Market | 12 mins | 0 completed | Learn |
| Inventory Errors | 14 mins | 0 completed | Learn |
What happens if we make a mistake when counting the inventory at the end of the period? The results may AMAZE you...
Practice: A company had a beginning inventory that was understated by $4,000 because the ending inventory in the previous period was understated by $4,000. The amounts reflected in the current end of period balance sheet are:
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Videos in Inventory Errors
Concept #1: Inventory Errors
Practice #1: Inventory Errors
Practice #2: Inventory Errors
Additional Problems
Inventory at the end of the current period was understated because one bin of inventory was not counted or included in the ending inventory totals. Because of this error:
a. Net income for the period was overstated.
b. Net income for the following period will be overstated.
c. The cost of goods sold for the current period was understated.
d. Total equity for the current year is overstated.
Consider the following:
Which line of the schedule above is CORRECT?
a. Line A
b. Line B
c. Line C
d. Line D
Wilmington Company reported pretax income amounts of: 2007, $25,000; and 2008, $30,000. Later it was discovered that the ending inventory for 2007 was understated by $2,000 (and not corrected in 2008). The correct pretax income for each year was:
a. 2007 - $23,000; 2008 - $32,000.
b. 2007 - $27,000; 2008 - $32,000.
c. 2007 - $27,000; 2008 - $28,000.
d. 2007 - $23,000; 2008 - $28,000.
e. None of the above is correct.
An understatement of the ending inventory in Year 1, if not corrected, will cause
a. Year 1 net income to be understated and Year 2 net income to be overstated.
b. Year 1 net income to be overstated and Year 2 net income to be overstated.
c. Year 1 net income to be overstated and Year 2 net income will be correct.
d. Year 1 net income to be overstated and Year 2 net income to be understated.