Uptown Mart reported the following amounts on their financial statements for 201
ID: 2552269 • Letter: U
Question
Uptown Mart reported the following amounts on their financial statements for 2012, 2013, and 2014:
(Note: Pages 233-234 explain the effect of inventory errors. Use them to work on this problem.)
For the Year Ended December 31
2012
2013
2014
Cost of goods sold
$95,000
$107,000
$87,000
Net income
32,000
26,000
24,000
Total current assets
145,000
152,000
120,000
Equity
238,000
255,000
268,000
It was discovered early in 2015 that the ending inventory on December 31, 2012, was overstated by $8,000 and the ending inventory on December 31, 2013, was understated by $3,500. The ending inventory on December 31, 2014, was correct. Ignoring income taxes, determine the correct amounts of cost of goods sold, net income, total current assets, and equity for each of the years 2012, 2013, and 2014.
2012:
Cost of goods sold (95000 +8000) =103,000
Net income(32000-8000) = 24,000
Total current assets (145,000-8000) = 137,000
Equity (238,000-8000) = 230,000
2013:
Cost of goods sold =
Net income =
Total current assets =
Equity =
2014:
Cost of goods sold =
Net income =
Total current assets =
Equity =
For the Year Ended December 31
2012
2013
2014
Cost of goods sold
Net income
Total current assets
Equity
For the Year Ended December 31
2012
2013
2014
Cost of goods sold
$95,000
$107,000
$87,000
Net income
32,000
26,000
24,000
Total current assets
145,000
152,000
120,000
Equity
238,000
255,000
268,000
Year I Year 2 Net Income Overstated t Understated Ending Inventory Cost of Goods Sold Net Income Cost of Goods Sold Understated Overstated t Overstated 1 Understated Understated Understated Overstated Overstated t * This error is less likely under a perpetual system versus a periodic system because it implies more inventory than is recorded (or less shrinkage than expected). Management will normally follow up and discover and correct this error before it impacts any accountsExplanation / Answer
CACLULATION OF THE CORRECTED COST OF GOODS SOLD 2012 2013 2014 PARTICUALRS Cost of Goods Sold $ 95,000 $ 1,07,000 $ 87,000 December 31, 2012 Ending inventory was overstated by $ 8,000 $ 8,000 Opening Ending inventory of 2012 is overstated by $ 8,000 $ 8,000 December 31, 2013 ending inventory is understated by $ 3,500 $ -3,500 Opening Ending inventory of 2014 is overstated by $ 3,500 $ -3,500 Revise Cost of Goods Sold = $ 1,03,000 $ 1,11,500 $ 83,500 CACLULATION OF THE CORRECTED NET INCOME 2012 2013 2014 Net Income $ 32,000 $ 26,000 $ 24,000 December 31, 2012 Ending inventory was overstated by $ 8,000 $ -8,000 Opening Ending inventory of 2012 is overstated by $ 8,000 $ -8,000 December 31, 2013 ending inventory is understated by $ 3,500 $ 3,500 Opening Ending inventory of 2014 is overstated by $ 3,500 $ 3,500 $ 24,000 $ 21,500 $ 27,500 CACLULATION OF THE CORRECTED ENDING INVENTORY CACLULATION OF THE CORRECTED CURRENT ASSETS 2012 2013 2014 Current Assets $ 1,45,000 $ 1,52,000 $ 1,20,000 December 31, 2012 Ending inventory was overstated by $ 8,000 $ -8,000 Opening Ending inventory of 2012 is overstated by $ 8,000 $ -8,000 December 31, 2013 ending inventory is understated by $ 3,500 $ 3,500 Opening Ending inventory of 2014 is overstated by $ 3,500 $ 3,500 $ 1,37,000 $ 1,47,500 $ 1,23,500 CACLULATION OF THE CORRECTED TOTAL EQUITY 2012 2013 2014 Current Assets $ 2,38,000 $ 2,55,000 $ 2,68,000 December 31, 2012 Ending inventory was overstated by $ 8,000 $ -8,000 Opening Ending inventory of 2012 is overstated by $ 8,000 $ -8,000 December 31, 2013 ending inventory is understated by $ 3,500 $ 3,500 Opening Ending inventory of 2014 is overstated by $ 3,500 $ 3,500 $ 2,30,000 $ 2,50,500 $ 2,71,500
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