Reference no: EM132958893

Exercise 1 - If the beginning merchandise inventory was understated $8,000 in 2014, purchases were overstated $6,000 in 2014 and the ending merchandise inventory was overstated $10,000 in 2015. Assume that no corrections were made during 2014 or 2015. All other items in the income statement were correct.

1) What affect does this have on the cost of goods sold and net income for 2014 in dollar amounts and whether it's understated or overstated?

2) What affect does this have on net income and retained earnings in dollar amounts and whether it's understated or overstated for 2015?

Exercise 2 - During 2017, Crimson Inc. purchased $2,775,000 of inventory. The cost of goods sold for 2017 was $2,635,938 and the ending inventory at December 31, 2017 was $544,688. What was the inventory turnover for 2017?

Exercise 3 - The following information relates to Rem Corp's accounts receivable for 2015:

Accounts receivable, 1/1/15 $500,000

Credit sales for 2015 2,000,000

Sales returns for 2015 60,000

Accounts written off during 2015 37,000

Collections from customers during 2015 1,500,000

Required - For 2015, what is the accounts receivable turnover in times and number of days? You will need to first determine the ending 12/31/15 accounts receivable balance. If applicable, rounded the average accounts receivable to the nearest whole dollar, round the accounts receivable turnover in times using one decimal place and round the number of days to the nearest whole number.