QUESTION 24 During its first year of operations, Edwards Company, using a period

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QUESTION 24 During its first year of operations, Edwards Company, using a periodic inventory system, made undiscovered errors in taking its year-end inventory that overstated Year 1 ending inventory by $100,000 The effect of these errors on reported income is A Year 1 Year 2 Overstated $100,000 Overstated 100,000 B Year 1 Year 2 Overstated Not affected $100,000 OC Year 1 Year 2 $100,000 Year 2 $100,000 Understated Understated S100,000 D Year 1 Overstated Understated 100,000 QUESTION 25 During its first year of operations, Felix Company, using a periodic inventory system, made undiscovered errors in taking its year-end inventory that overstated Year 1 ending inventory by $200,000 The effect of these errors on reported income is: A. Year 1 Year 2 Understated Understated 200,000 $200,000 B. Year 1 Overstated $200,000 Year 2 Overstated 200,000 C Year 1 Year 2 Overstated Not affected $200,000 O D. Year 1 Year 2 Overstated Understated 200,000 $200,000

Explanation / Answer

24) During its first year of operations, Edwards company using a periodic inventory system, made undiscovered errors in takings its year end inventory that overstated year 1 ending inventory by $100000

Year 1 Ending inventory overstated means cost of goods sold is understated and cost of goods sold is understated means net income is overstated of year 1 and net income is understated of year 2

So answer is d)

25) During its first year of operations, Felix company using a periodic inventory system, made undiscovered errors in takings its year end inventory that overstated year 1 ending inventory by $200000

Year 1 Ending inventory overstated means cost of goods sold is understated and cost of goods sold is understated means net income is overstated of year 1 and net income is understated of year 2

So answer is d)

Year 1 Year 2 Overstated Understated $100000 $100000

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