14 value: 14.00 points Spears & Cantrell announced inventory had been overstated

Question

14 value: 14.00 points Spears & Cantrell announced inventory had been overstated by $30 at the end of its second quarter. The error wasn't discovered and corrected in the company's periodic inventory system until after the end of the third quarter. The following table shows the amounts that were originally reported by the company Q1 Q2 $3,000 $3,500 $3,750 2,350 Q3 Net Sales Cost of Goods Sold 2,040 2,580 Gross Profit $ 960 $1,150 $1,170 Required 1. Restate the income statements to reflect the correct amounts, after fixing the inventory error. SPEARS&CANTRELL; COMPANY Income Statements (Corrected) Q1 Q2 Q3 Net Sales Cost of Goods Sold Gross Profit 2-a. Compute the gross profit percentage for each quarter (a) before the correction and (b) after the correction. (Round your answers to the nearest whole percent.) Q1 Q2 Q3 Before Correction After Correction 2-b. Do the results lend confidence to your corected amounts? Yes No

Explanation / Answer

Req 1: Income Statement (Corrected) Q1 Q2 Q3 Net sales 3000 3500 3750 Cost of Goods sold 2040 2380 2550 Gross profits 960 1120 1200 Req 2-a Q1 Q2 Q3 Before correction 32.00% 32.86% 31.20% After correction 32.00% 32.00% 32.00% Req 2-b: Yes, the results lend confidence to corrected amounts

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