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Vibrant Company had $980,000 of sales in each of Year 1, Year 2, and Year 3,...

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Accounting

Vibrant Company had $980,000 of sales in each of Year 1, Year 2,and Year 3, and it purchased merchandise costing $540,000 in eachof those years. It also maintained a $280,000 physical inventoryfrom the beginning to the end of that three-year period. Inaccounting for inventory, it made an error at the end of Year 1that caused its Year 1 ending inventory to appear on its statementsas $260,000 rather than the correct $280,000.

Required:
1. Determine the correct amount of the company’s grossprofit in each of Year 1, Year 2, and Year 3.
2. Prepare comparative income statements to showthe effect of this error on the company's cost of goods sold andgross profit for each of Year 1, Year 2, and Year 3.

VIBRANT COMPANY
Comparative Income Statements
Year 1Year 2Year 33-year total
$0
Cost of goods sold
000
Cost of goods sold0000
Gross profit$0$0$0$

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Answer

Required 1
Vibrant company
Compartive income statements
Year-1 Year-2 Year-3 3-year total
Sales $980,000 $980,000 $980,000 $2,940,000
Cost of goods sold
Beginning inventory $280,000 $280,000 $280,000
cost of purchases $540,000 $540,000 $540,000
goods available for sale $820,000 $820,000 $ 82,000
Ending inventory $280,000 $280,000 $280,000
Cost of goods sold $540,000 $540,000 $540,000 $1,620,000
Gross profit $440,000 $440,000 $440,000 $1,320,000
Required 2
Vibrant company
Compartive income statements
Year-1 Year-2 Year-3 3-year total
Sales $980,000 $980,000 $980,000 $2,940,000
Cost of goods sold
Beginning inventory $280,000 $260,000 $280,000
cost of purchases $540,000 $540,000 $540,000
goods available for sale $820,000 $800,000 $820,000
less- Ending inventory $260,000 $280,000 $280,000
Cost of goods sold $560,000 $520,000 $540,000 $1,620,000
Gross profit $420,000 $460,000 $440,000 $1,320,000
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