80.2K

Verified Solution

Link Copied!

effect of errors in physical inventory

1. EX 07-15 ALGO Effect of Errors in Physical Inventory 2. EXOT.03 ALGO 3. EX.07-04 ALGO 4. EX.07-03 Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 2048, Fonda Motorcycle Shop incorrectly counted its inventory as $227,250 instead of the correct amount of $218,160. 5. EX07 13 ALGO 6. EX.07-13. ALGO Enter all amounts as positive numbers. a. State the effect of the error on the December 31, 2048, balance sheet of Fonda Motorcycle Shop. Overstated/Understated Balance Sheet Items Merchandise Inventory Current Assets Owner's Equity b. State the effect of the error on the income statement of Fonda Motorcycle Shop for the year ended December 31, 2018 Income Statement Items Overstated/Understated Cost of Merchandise Sold Gross Profit Net Income c. If uncorrected, what would be the effect of the error on the 2049 income statement? Income Statement items Understated/Overstated Cast of Merchandise Sold Gross Prot Net Income d. If uncorrected, what would be the effect of the error on the December 31, 2019, balance sheet? 1. The December 31, 2019, balance sheet would be correct, since the 2048 inventory error reverses itself in 2019. 2. The December 31, 2019, balance sheet would be incorrect, since the 2048 inventory error understates the inventory in 2019. 3. The December 31, 2019, balance sheet would be incorrect, since the 20Y8 inventory error overstates the inventory in 2019

Answer & Explanation Solved by verified expert

See Answer