Solution-What is the effect and amount the misclassification

What is the effect and amount the misclassification

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Question 1: TK Auto Glass Inc. began business on January 1, 20XX. During the year, TK purchased inventory for resale. TK paid $80,000 in freight charges on these merchandise purchases. During 20XX, TK sold all its inventory. The company paid $40,000 in freight on these sales. After the financial statements for 20XX were released, it was discovered that the $80,000 freight paid on merchandise purchases was inadvertently misclassified as freight paid on merchandise sales (freight-out). Indicate the effect and $ amount this misclassification would have on the following (if there is no effect, say $0)

Effect $
Cost of goods sold
Gross Profit
Operating Expenses
Net Income

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What is the effect and amount the misclassification

Reference no: EM132494563

Reference no: EM132494563

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