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Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372 Exercise 39
(Supplement 7B) Analyzing and Interpreting the Effects of Inventory Errors
Partial income statements for Murphy Murphy (M M) reported the following summarized amounts:
After these amounts were reported, M M's accountant determined that the inventory on December 31, 2011, was understated by $3,000. The inventory balance on December 31, 2012, was accurately stated.
Required:
1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
2. Compute the gross profit percentage for all four years both ( a ) before the correction and ( b ) after the correction. Does the pattern of gross profit percentages lend confidence to your corrected amounts Explain. Round your answer to the nearest percentage.
TIP: Gross profit percentage is calculated as (Gross Profit ÷ Net Seles) × 100.
Partial income statements for Murphy Murphy (M M) reported the following summarized amounts:
After these amounts were reported, M M's accountant determined that the inventory on December 31, 2011, was understated by $3,000. The inventory balance on December 31, 2012, was accurately stated.
Required:
1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
2. Compute the gross profit percentage for all four years both ( a ) before the correction and ( b ) after the correction. Does the pattern of gross profit percentages lend confidence to your corrected amounts Explain. Round your answer to the nearest percentage.
TIP: Gross profit percentage is calculated as (Gross Profit ÷ Net Seles) × 100.
Explanation
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1.
It is observed from the reports of M ...
Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
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