What would be the impact on the profit of the Alpha Ltd

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Question - Alpha Ltd. Has the following details as on March 31, 2016

2016 2015

Sales 2250 2000

Opening stock 30 20

Production 2460 2000

Closing stock 400 30

Cost of goods sold (opening stock + production - Closing stock) 2090 1990

Other expenses 80 50

Net Profit/Loss 80 (40)

(a) Suppose the accountant has wrongly computed the closing stock while adding stocks, to an extent of 30%. What would be the impact on the profit of the Alpha Ltd compare to the previous year (2015)?

(b) Suppose the error was not rectified in the current year (31st March 2016). Next year Alpha has produced Rs.2650 and sold goods for Rs.2800. It has a closing stock of Rs.240 and there is no error in computing the closing stock value. What will be the reported profit for the year ending 31st March 2017?

Reference no: EM132595966

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