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???????Vibrant Company had $910,000 of sales in each of three consecutive years 2016–2018, and it purchased...

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Accounting

???????Vibrant Company had $910,000 of sales in each of threeconsecutive years 2016–2018, and it purchased merchandise costing$505,000 in each of those years. It also maintained a $210,000physical inventory from the beginning to the end of that three-yearperiod. In accounting for inventory, it made an error at the end ofyear 2016 that caused its year-end 2016 inventory to appear on itsstatements as $190,000 rather than the correct $210,000.

  1. Determine the correct amount of the company’s gross profit ineach of the years 2016–2018.
  2. Prepare comparative income statements to show the effect ofthis error on the company's cost of goods sold and gross profit foreach of the years 2016?2018.

Determine the correct amount of the company's gross profit ineach of the years 2016?2018.

VIBRANT COMPANY

Comparative Income Statements

2016

2017

2018

3-year total

Cost of goods sold

Cost of goods sold

Gross profit

Prepare comparative income statements to show the effect of thiserror on the company's cost of goods sold and gross profit for eachof the years 2016?2018.

VIBRANT COMPANY

Comparative Income Statements

2016

2017

2018

3-year total

Cost of goods sold

Cost of goods sold

Gross profit

Answer & Explanation Solved by verified expert
4.2 Ratings (554 Votes)

Solution 1:

Vibrant Company
Comparative Income Statement
Compuation of Correct Gross Profit
Particulars 2016 2017 2018 3 years total
Sales $910,000.00 $910,000.00 $910,000.00 $2,730,000.00
Cost of goods sold:
Beginning inventory $210,000.00 $210,000.00 $210,000.00
Purchases $505,000.00 $505,000.00 $505,000.00
Goods available for sale $715,000.00 $715,000.00 $715,000.00
Ending inventory $210,000.00 $210,000.00 $210,000.00
Cost of goods sold $505,000.00 $505,000.00 $505,000.00 $1,515,000.00
Gross Profit $405,000.00 $405,000.00 $210,000.00 $1,020,000.00

Solution 2:

Vibrant Company
Comparative Income Statement
Effect of error on company cost of goods sold and Gross Profit
Particulars 2016 2017 2018 3 years total
Sales $910,000.00 $910,000.00 $910,000.00 $2,730,000.00
Cost of goods sold:
Beginning inventory $210,000.00 $190,000.00 $210,000.00
Purchases $505,000.00 $505,000.00 $505,000.00
Goods available for sale $715,000.00 $695,000.00 $715,000.00
Ending inventory $190,000.00 $210,000.00 $210,000.00
Cost of goods sold $525,000.00 $485,000.00 $505,000.00 $1,515,000.00
Gross Profit $385,000.00 $425,000.00 $210,000.00 $1,020,000.00

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