Winston Auto Parts reported the following information in its income statement for 2013 and 2014: Additional Information: While completing Winston's 2015 financial statements, the accountant realized that errors had been made in previous years' inventory calculations. The correct ending inventory at December 31, 2012 was $6,000, the correct ending inventory at December 31, 2013 was $4,000, and the correct ending inventory at December 31, 2014 was $7,000.
Instructions
a. Calculate the correct cost of goods sold and gross profit for 2013 and for 2014.
b. Calculate the inventory turnover for 2013 and 2014:
(i) using the originally reported information; and
(ii) using the corrected information.
c. Calculate the gross profit margin for 2013 and 2014:
(i) using the originally reported information; and
(ii) using the corrected information.
d. Explain how the errors will have caused management performance to be improperly evaluated.

Question

Winston Auto Parts reported the following information in its income statement for 2013 and 2014:  Additional Information:  While completing Winston's 2015 financial statements, the accountant realized that errors had been made in previous years' inventory calculations. The correct ending inventory at December 31, 2012 was $6,000, the correct ending inventory at December 31, 2013 was $4,000, and the correct ending inventory at December 31, 2014 was $7,000.
Instructions 
a. Calculate the correct cost of goods sold and gross profit for 2013 and for 2014.
b. Calculate the inventory turnover for 2013 and 2014:
(i) using the originally reported information; and
(ii) using the corrected information.
c. Calculate the gross profit margin for 2013 and 2014:
(i) using the originally reported information; and
(ii) using the corrected information.
d. Explain how the errors will have caused management performance to be improperly evaluated.

Quizplus · Accepted Answer

The Answer of Winston Auto Parts reported the following information in its income statement for 2013 and 2014:  Additional Information:  While completing Winston's 2015 financial statements, the accountant realized that errors had been made in previous years' inventory calculations. The correct ending inventory at December 31, 2012 was $6,000, the correct ending inventory at December 31, 2013 was $4,000, and the correct ending inventory at December 31, 2014 was $7,000.
Instructions 
a. Calculate the correct cost of goods sold and gross profit for 2013 and for 2014.
b. Calculate the inventory turnover for 2013 and 2014:
(i) using the originally reported information; and
(ii) using the corrected information.
c. Calculate the gross profit margin for 2013 and 2014:
(i) using the originally reported information; and
(ii) using the corrected information.
d. Explain how the errors will have caused management performance to be improperly evaluated.

Winston Auto Parts Reported the Following Information in Its Income