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Prepare an extract from the company income statement

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Reference no: EM132495300

Whilst preparing its financial statement for the year to 31 December 2019, a company discovers that because of an arithmetic error its inventory at 31 December 2018 was understated by K100, 000. This is a material error.

An extract from the company's draft income statement for the year to 31 December 2019 before correcting the error was as follows

                                                              2019                             2018

                                                                 000                             000

Sales Sales                                    2,820                     2,370

Cost of Cost of Sale                         2,250                     1,620

Gross p Gross Profit                          570                          750

Other e other expenses                      360                         330

Profit b Profit before tax                      210                       420

ax tax                                              42                           84

Profit after tax                                     168                       336

  • Retained earnings were reported to be K710, 000 on December 2017.No dividends were paid in either 2018 or 2019

Question a) State what type of error this is and explain how you will account for it.

Question b) Prepare an extract from the company's income statement for the year 2019 stating comparative figures for 2018

Question c) Prepare the journal entry to effect this adjustment

Reference no: EM132495300

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