Answer:
Part a. Was last year's reported gross profit of $2.9 million overstated, understated, or correct? What was the correct amount of gross profit last year?
Gross Profit was Understated by $1.2 million
Correct Gross Profit is $4.1 million
Part b. Is this year's gross profit of $3.6 million overstated, understated, or correct? What is the correct amount of gross profit for the current year?
Gross Profit is Overstated by $1.2 million
Correct Gross Profit is $2.4 million
Part c. Was last year's reported cost of goods sold of $5.4 million overstated, understated, or correct? What was the correct amount of cost of goods sold last year?
Cost of Goods Sold was Overstated by 1.2 million
Correct Cost of Goods Sold is $4.2 million
Part d. Is this year's cost of goods sold of $5.7 million overstated, understated, or correct? What is the correct amount of cost of goods sold for this year?
Cost of Goods Sold was Understated by 1.2 million
Correct Cost of Goods Sold is $6.9 million
Explanation:
Closing Inventory Reduce the Cost of Sales at the end of the year.It is Transferred to the Statement of Financial Position to depict a resource controlled by the entity from which economic benefit is expected to flow in the entity - Asset.
Opening Inventory Increase the cost of Sales because it presents a depletion of Assets of Inventory.
Cost of Sales and Gross Profit have an Inverse Relationship.
