Answer:
(1)$440,000 (2) due to this error in inventory it had an effect on both years 2016 and 2017 because closing inventory of previous year will be opening inventory of the subsequent year.
Explanation:
Solution
Given that:
(1) The correct amount of gross profit in each of the years 2016-18 is given as follows:
The Gross profit = Sales- purchases +closing inventory-Inventory at beginning
The Gross profit = $980,000-540,000+280,000-280,000 =$440,000
(2)The Comparative income statement to show the effect of error in cost of goods sold of vibrant company is shown below:
Particular 2016 2017 2018 3 years total
Sales $980,000 $980,000 $980,000 $2,940,000
Cost of goods sold
Purchases $540,000 $540,000 $540,000 $1,620,000
add :Beginning inventory:
$280,000 $260,000 $280,000 280,000
Less: Closing inventory:
($260,000) ($280,000) (280,000) (280,000)
Total Cost of goods sold:
$560,000 $520,000 $540,000 $540,000
Gross profit $420,000 $460,000 $440,000 $440,000
For this error in inventory it had an effect on both years 2016 and 2017 because closing inventory of previous year will be opening inventory of the subsequent year.
