Answer:
Explanation:
From the give information; we are to:
1. Determine the correct amount of the company’s gross profit in each of the years 2016–2018.
The correct amount of the company's gross profit in each of the years 2016 - 2018 can be seen as computed in the table below.
VIbrant Company Income statement
2016 2017 2018
Sales 970,000 970,000 970,000
-
Cost of good
sold:
Beginning 270,000 270,000 270,000
Inventory
+
<u>Purchase 535,000 535,000 535,000 </u>
<u />
The cost of good
available for sale 805000 805000 805000
is:
-
<u>Ending Inventory 270,000 270,000 270,000 </u>
Cost of good sold 535,000 535,000 535,000
<u>Gross Profit 435 000 435000 435000 </u>
N:B ;
Gross Profit = Sales - Cost of good sold
Gross Profit = 970000- 535000
Gross Profit = 435000
2. Prepare comparative income statements to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2016−2018.
For 2016; the comparative income statement is computed as follows:
Debit Credit
Sales 970000
Less:(-)
Cost of good sold
Beginning Inventory 270000
Add Purchase <u> 535000</u>
Cost of goods available 805000
for sale
Less (-)
Ending Inventory <u> 250000</u>
Cost of good sold <u> 555000</u>
Gross profit <u> 415000</u>
For 2017; the comparative income statement is computed as follows:
Debit Credit
Sales 970000
Less:(-)
Cost of good sold
Beginning Inventory 250000
Add Purchase <u> 535000</u>
Cost of goods available 785000
for sale
Less (-)
Ending Inventory <u> 270000</u>
Cost of good sold <u> 515000</u>
Gross profit <u> 455000</u>
For 2018; the comparative income statement is computed as follows:
Debit Credit
Sales 970000
Less:(-)
Cost of good sold
Beginning Inventory 270000
Add Purchase <u> 535000</u>
Cost of goods available 805000
for sale
Less (-)
Ending Inventory <u> 270000</u>
Cost of good sold <u> 535000</u>
Gross profit <u> 435000</u>
