Louise Company reported the following income statement information for Year 1 and Year 2: The beginning inventory balance for Year 1 is correct. The ending inventory balance for Year 2 is also correct. However, the ending inventory figure for Year 1 was overstated by $20,000. Given this information, the correct gross profit figures for Year 1 and Year 2 would be:

Question

Quizplus · Accepted Answer

To calculate the correct gross profit figures for Year 1, we need to adjust the ending inventory figure by subtracting the overstated amount of $20,000. This means that the cost of goods sold (COGS) figure for Year 1 will increase by $20,000.

Year 1: 
Revenue - COGS = Gross Profit 
$350,000 - ($201,000 + $20,000) = $129,000

For Year 2, we can use the information given in the income statement as the inventory figures are correct.

Year 2: 
Revenue - COGS = Gross Profit 
$530,000 - $274,000 = $276,000

Therefore, the correct gross profit figures for Year 1 and Year 2 are $129,000 and $276,000, respectively. The correct answer is C.

Louise Company Reported the Following Income Statement Information for Year