Question

Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $233,400 instead of the correct amount of $238,600. Enter all amounts as positive numbers. a. State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply. Balance Sheet Items Understated/Overstated Amount Merchandise Inventory $fill in the blank 2 Current Assets fill in the blank 4 Total Assets fill in the blank 6 Owner's Equity fill in the blank 8 b. State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2. Income Statement Items Overstated/Understated Amount Cost of Merchandise Sold $fill in the blank 10 Gross Profit fill in the blank 12 Net Income fill in the blank 14 c. If uncorrected, what would be the effect of the error on the 20Y3 income statement

Answer 1

Answer:

A. Balance Sheet

Merchandise Inventory $5,200 Understated

Current Asset $5,200 Understated

Total Assets $5,200 Understated

Owner's equity $5,200 Understated

B. Income Statement

Cost of merchandise sold $5,200 Overstated

Gross profit $5,200 Understated

Net income $5,200 Understated

C. Income Statement

Cost of merchandise sold $5,200 Understated

Gross profit $5,200 Overstated

Net income $5,200 Overstated

Explanation:

A. Calculation to State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply

BALANCE SHEET

Merchandise Inventory $5,200 Understated

Current Asset $5,200 Understated

Total Assets $5,200 Understated

Owner's equity $5,200 Understated

($238,600-$233,400)

B. Calculation to State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2.

INCOME STATEMENT

Cost of merchandise sold $5,200 Overstated

Gross profit $5,200 Understated

Net income $5,200 Understated

($238,600-$233,400)

C. Calculation to determine what would be the effect of the error on the 20Y3 income statement If uncorrected

INCOME STATEMENT

Cost of merchandise sold $5,200 Understated

Gross profit $5,200 Overstated

Net income $5,200 Overstated

($238,600-$233,400)