Answer:
$20,506,758
.00
Explanation:
The movement in inventory over a given period may be given as
Opening balance + purchases - cost of goods sold = closing balance
As such, an overstatement of the closing balance would result in an understatement of the cost of goods sold. An understatement of the cost of goods sold would in turn result in gross and net income and vice versa.
If the overstatement of inventory was $8,806,000, this means that cost of sales was understated by the same amount. Given that the reported incorrect net income amount of $25,852,000 and tax rate was 39.3%,
Income before tax = $25,852,000/(1 - 0.393)
= $42,589,785.83
Corrected income before tax = $42,589,785.83 - $8,806,000.00
= $33,783,785.83
Net income after tax = $33,783,785.83 - (39.3% × $33,783,785.83)
= $20,506,758
.00
