Requirement 1. Prepare corrected income statements for the three years. Plush Ri

Question

Requirement 1. Prepare corrected income statements for the three years. Plush River Carpets Income Statement For the Years Ended December 31, 2019, 2018, and 2017 2019 Ending Merchandise Inventory Overstated by $9,000 2018 2017 Ending Merchandise Inventory Understated by $8,000 Correct Net Sales Revenue Cost of Goods Sold: Beginning Merchandise Inventory Net Cost of Purchases Cost of Goods Available for Sale Less: Ending Merchandise Inventory Cost of Goods Sold Gross Profit Operating Expenses Net Income

Explanation / Answer

Plush River Carpets

Income Statement

For the Years Ended December 31, 2019, 2018 and 2017

2019

Ending Merchandise Inventory Overstated by 9,000

2017

Ending Merchandise Inventory Understated by 8,000

2019

Ending Merchandise Inventory Overstated by 9,000

Correct

2017

Ending Merchandise Inventory Understated by 8,000

Net Sales Revenue 214,000 165,000 172,000 Cost of Goods Sold : Beginning Merchandise Inventory 25,000 37,000 46,000 Net Cost of Purchases 134,000 90,000 76,000 Cost of Goods Available for Sale 159,000 127,000 122,000 Less : Ending Merchandise Inventory (34,000-9,000) 25,000 25,000 37,000 (29,000+8,000) Cost of Goods Sold 134,000 102,000 85,000 Gross Profit 80,000 63,000 87,000 Operating Expenses 63,000 42,000 45,000 Net Income 17,000 21,000 42,000

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