1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
mars1129 [50]
3 years ago
15

Berkshire Inc. uses a periodic inventory system. At the end of 2015, it missed counting some inventory items, resulting in an in

ventory understatement by $510,000. Assume that Berkshire has a 30% income tax rate and that this was the only error it made. If undetected, what is the effect of this error on Berkshire's 12/31/2015 balance sheet?
Assets understated by $510,000 and shareholders' equity understated by $510,000.

Assets understated by $357,000 and shareholders' equity understated by $357,000.

Assets understated by $510,000, liabilities understated by $153,000 and shareholders' equity understated by $357,000.

None of the above is correct.
Business
1 answer:
zlopas [31]3 years ago
6 0

Answer:

Assets understated by $510,000, liabilities understated by $153,000 and shareholders' equity understated by $357,000.

Explanation:

An understatement of closing inventory will have the following effects,

First of all the inventory as an asset is understated by $510,000

Second, this inventory was subject to deduction from the Cost of goods sold as, Cost of goods sold = Opening Inventory + Purchases - Closing Inventory.

Since this amount was not subtracted from the CGS, the gross profit and ultimately the Net profits were understated by $510,000.

This will be added in the net profits.

With an increase in net profits, the tax payable amount also increases. This is calculated as 510,000 * 0.30 = $153,000

So total change in profits is = 510,000 - 153,000 = $357,000

While $153,000 is still payable and is recorded as a tax payable liability.

Thus,

Assets understated by $510,000

Liabilities Understated by $153,000 (tax payable)

Share holders equity understated by $357,000 (part of retained profits)

Hope that helps.

You might be interested in
Sister Pools sells outdoor swimming pools and currently has an aftertax cost of capital of 11.6 percent. Al's Construction build
Aloiza [94]

Answer:

$1,952 (Positive NPV)

Explanation:

Year   Annual CF ($)   PV factor at 10.30%    PV of Cash Flow ($)

1               17,000                  0.90662                         15,413

2              17,000                  0.82196                          13,973

3              17,000                   0.74520                         12,668

4              17,000                   0.67561                          11,485

5              17,000                   0.61252                          10,413

6              17,000                   0.55532                          9,441

7              17,000                    0.50347                          8,559

TOTAL                                    1.73554                          81,952

Net Present Value (NPV) = Present value of annual cash flows - Initial Cost

Net Present Value (NPV) = $81,952 - $80,000

Net Present Value (NPV) = $1,952 (Positive NPV)

8 0
3 years ago
Douclamp, a steel manufacturing company, makes small investments in three iron ore plants in different cities. When one of the p
Bess [88]

Answer: Options-based planning

Explanation:

The Option based planning is one of the concept that helps in maintain the flexibility of the various types of plans for making the various types of investments.

The main purpose of the option based planning is that it helps in maintaining the slack resources are are specifically used in the for  of extra resource for the purpose of adapting the various types of changes and also the problems.

According to the given question, the Douclamp is one of the type of manufacturing company that basically making small level of investments on the iron ore plant.

Therefore, Douclamp is using the options based planning based on the given scenario.  

8 0
3 years ago
Theory X managers implement a more rigid environment. a. increase diversity. b. strive to cut costs and increase efficiency. c.
pychu [463]

Answer:

b. strive to cut costs and increase efficiency.

Explanation:

Theory X managers is pessimistic. They believe people are lazy and unproductive. They will look to implement politics to increase the productivity,.

3 0
3 years ago
Question 1 of 10
fiasKO [112]

Answer:CURRENCY

Explanation:

IM TAKING THE TEST RIGHT NOW I GOTCHU HAVE A WONDERFUL DAY

7 0
3 years ago
OHARA COMPANY
blondinia [14]

Answer:

Explanation:

From the given information, the ratio analysis for the year 2017 at OHARA Company can be computed as follows:

1. Working capital = Current (assets - liabilities)

Working capital = $458900 - $195500

Working capital = $263,400 (for 2017)

Given that the working capital for 2016 = $160,500

Thus, the % increase of 2017 over 2016 = 64.11% increase.

2. Current ratio = Current assets / Current liabilities

Current ratio = 458,900/195,500

Current ratio = 2.35 (for 2017)

Given that the Current ratio for 2016 = 1.65

Thus, the % increase of 2017 over 2016 = 42.43% increase

3. Free cash flows = Operating cash flows - Capital expenditure - dividends

Free cash flows = $190800 - $92000 - $31000

Free cash flows = $67,800

Given that the free cash flow for 2016 = $48,700

Thus, the % increase of 2017 over 2016 = 39.22%

4.

Debt to assets ratio = \dfrac{Total \ debt} { total  \ assets}

Debt to assets ratio = 395,500/10,34,200

Debt to assets ratio = 38.24%

Given that the debt to assets ratio for 2016 = 31%

Thus, the % increase of 2017 over 2016 = 23.35%

5.

Earnings per share = \dfrac{earnings \  available \  to \  equity  \ shares}{weighted  \ a verage  \  equity \ shares}

Earnings per share = \dfrac{153100}{50000}

Earnings per share = $3.06

Given that the earnings per share = $3.15

Thus, the % decrease of 2017 over 2016 = 2.86%

3 0
2 years ago
Other questions:
  • Exercise 1-13 Identifying effects of transactions using the accounting equation LO P1 Ming Chen began a professional practice on
    7·1 answer
  • 1. Assume you are planning to invest $200 each year for four years and will earn 8 percent per year. Determine the future value
    6·2 answers
  • If a foreign country's consumers tend to only purchase products that are produced locally, the least effective strategy for a U.
    7·1 answer
  • Sterling, Inc. is a manufacturer of state-of-the-art computers. For the past ten years, Sterling has acquired all of its microch
    15·1 answer
  • Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $25, computed as fol
    8·1 answer
  • Following is partial information for the income statement of Audio Solutions Company under three different inventory costing met
    9·1 answer
  • Which one of the following is a leakage from circular flow of income?
    14·1 answer
  • you are writing a long, complex document in which you need to explain a series of events that led to a problem, evaluate several
    14·1 answer
  • This is my mom channel please subscribe​
    13·1 answer
  • Maria has a balance of $4,500 on her credit card with a 22% interest rate. How long will it take her balance to double?
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!