What is error in total net profit for the inventory errors

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Reference no: EM131501397

Assignment

Doubletree Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2010, is understated by $54,000, and inventory on December 31, 2011, is overstated by $24,000.

  For Year Ended December 31

2010

2011

2012

  (a)

  Cost of goods sold

$

729,000  

$

959,000  

$

794,000  

  (b)

  Net profit

 

272,000  

 

279,000  

 

254,000  

  (c)

  Total current assets

 

1,251,000  

 

1,364,000  

 

1,234,000  

  (d)

  Total equity

 

1,391,000  

 

1,584,000  

 

1,249,000  

Required:

1. For each key financial statement figure-(a), (b), (c), and (d) above-prepare a table to show the adjustments necessary to correct the reported amounts.

(a)

  Cost of goods sold:

 

2010

2011

2012

  Reported amount

 

$

$

$

  Adjustments for:

12/31/2010 error




 

12/31/2011 error




 

 




  Corrected amount

 

$

$

$

 

 

 

 

 

(b)

  Cost of goods sold:

 

2010

2011

2012

  Reported amount

 

$

$

$

  Adjustments for:

12/31/2010 error




 

12/31/2011 error




 

 




  Corrected amount

 

$

$

$

 

 

 

 

 

(c)

  Total current assets

 

2010

2011

2012

  Reported amount

 

$

$

$

  Adjustments for:

12/31/2010 error




 

12/31/2011 error




 

 




  Corrected amount

 

$

$

$

 

 

 

 

 

(d)

  Equity:

 

2010

2011

2012

  Reported amount

 

$

$

$

  Adjustments for:

12/31/2010 error




 

12/31/2011 error




 

 




  Corrected amount

 

$

$

$

 

 




2. What is the error in total net profit for the combined three-year period resulting from the inventory errors? Explain.

Reference no: EM131501397

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