The management of Dayton Ltd. erroneously understated its inventory during 2010 by $28,000. Using the information below and assuming there are no distributions of retained earnings: (1) present a brief analysis with the accurate numbers and the numbers in error and (2) explain whether retained earnings would be overstated, understated, or be indifferent to the error at the end of 2011.
2010 Sales: $60,000
2010 Purchases: $50,000
2010 Cost of Goods Sold (before inventory error) $20,000
2011 Sales: $210,000
2011 Purchases: $60,000
2011 Cost of Goods Sold (based on error numbers): $68,000

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The Answer of The management of Dayton Ltd. erroneously understated its inventory during 2010 by $28,000. Using the information below and assuming there are no distributions of retained earnings: (1) present a brief analysis with the accurate numbers and the numbers in error and (2) explain whether retained earnings would be overstated, understated, or be indifferent to the error at the end of 2011.
2010 Sales: $60,000
2010 Purchases: $50,000
2010 Cost of Goods Sold (before inventory error) $20,000
2011 Sales: $210,000
2011 Purchases: $60,000
2011 Cost of Goods Sold (based on error numbers): $68,000

The Management of Dayton Ltd