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Corrected Net Income

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Vance Company reported net incomes for a three-year period as follows:
2013, $191,000 2014, $200,900 2015, $182,900
In reviewing the accounts in 2016 after the books for the prior year have been closed, you find that the following errors have been made in summarizing activities:
2013 2014 2015 Overstatement of ending inventory $39,100 $51,100 $26,100 Understatement of accrued advertising expense 9,100 11,600 6,800

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Explanation / Answer

Thus,

Particulars 2013 2014 2015 Net Income 1,91,000 2,00,900 1,82,900 Rectification Adjustment: Less: Overstatement of ending Inventory 39,100 51,100 26,100 Add: Overstatement of opening Inventory -   39,100 51,100 Less: Understatement of accrued advertisement expense 9,100 11,600 6,800 Corrected Net Income 1,42,800 1,77,300 2,01,100

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