Allen's Hardware Store prepared the following analysis of cost of goods sold for the previous three years: Net income for the years 2021, 2022, and 2023 was $75,000, $60,000, and $57,000, respectively. Since net income was consistently declining, Mr. Allen hired a new accountant to investigate the cause(s) for the declines.
The accountant determined the following:
1. Purchases of $20,000 were not recorded in 2021.
2. The 2021 December 31 inventory should have been $26,000.
3. The 2022 ending inventory included inventory costing $8,000 that was purchased FOB destination and in transit at year-end.
4. The 2023 ending inventory did not include goods costing $4,000 that were shipped on December 29 to Wilson Plumbing Company, FOB shipping point. The goods were still in transit at the end of the year.
Instructions
Determine the correct net income for each year. (Show all computations.)

Question

Allen's Hardware Store prepared the following analysis of cost of goods sold for the previous three years:  Net income for the years 2021, 2022, and 2023 was $75,000, $60,000, and $57,000, respectively. Since net income was consistently declining, Mr. Allen hired a new accountant to investigate the cause(s) for the declines.
The accountant determined the following:
1. Purchases of $20,000 were not recorded in 2021.
2. The 2021 December 31 inventory should have been $26,000.
3. The 2022 ending inventory included inventory costing $8,000 that was purchased FOB destination and in transit at year-end.
4. The 2023 ending inventory did not include goods costing $4,000 that were shipped on December 29 to Wilson Plumbing Company, FOB shipping point. The goods were still in transit at the end of the year.
Instructions
Determine the correct net income for each year. (Show all computations.)

Quizplus · Accepted Answer

The Answer of Allen's Hardware Store prepared the following analysis of cost of goods sold for the previous three years:  Net income for the years 2021, 2022, and 2023 was $75,000, $60,000, and $57,000, respectively. Since net income was consistently declining, Mr. Allen hired a new accountant to investigate the cause(s) for the declines.
The accountant determined the following:
1. Purchases of $20,000 were not recorded in 2021.
2. The 2021 December 31 inventory should have been $26,000.
3. The 2022 ending inventory included inventory costing $8,000 that was purchased FOB destination and in transit at year-end.
4. The 2023 ending inventory did not include goods costing $4,000 that were shipped on December 29 to Wilson Plumbing Company, FOB shipping point. The goods were still in transit at the end of the year.
Instructions
Determine the correct net income for each year. (Show all computations.)

Allen's Hardware Store Prepared the Following Analysis of Cost of Goods