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Partial income statements for Sherwood Company summarized for a four-year period show the following: ...

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Accounting

Partial income statements for Sherwood Company summarized for a four-year period show the following:

2017 2018 2019 2020
Net Sales $ 2,000,000 $ 2,400,000 $ 2,500,000 $ 3,000,000
Cost of Goods Sold 1,400,000 1,660,000 1,770,000 2,100,000
Gross Profit $ 600,000 $ 740,000 $ 730,000 $ 900,000

An audit revealed that in determining these amounts, the ending inventory for 2018 was overstated by $20,000. The inventory balance on December 31, 2019, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.

2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. (Round your answers to the nearest whole percent.)

2-b. Do the results lend confidence to your corrected amounts? multiple choice

  • Yes

  • No

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