Slowinski Corporation reported net income of $415,000 for the current year. After the financial statements had been prepared, it was discovered that ending inventory had been overstated by $35,000 and beginning inventory was understated by $2000. The correct net income was:

Question

Quizplus · Accepted Answer

The net income needs to be adjusted for the inventory errors. Overstating ending inventory by $35,000 means cost of goods sold was understated, which overstates net income by $35,000. Understating beginning inventory by $2,000 means cost of goods sold was understated, which overstates net income by $2,000. Therefore, the net income should be reduced by $37,000 ($35,000 + $2,000), resulting in a corrected net income of $378,000 ($415,000 - $37,000).

Slowinski Corporation Reported Net Income of $415,000 for the Current