AFM123 : Inventory Errors - solution.pdf
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20 Dec 2014
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Dallas Corporation prepared thefollowing two income statements: |
First Quarter 2012 | Second Quarter 2012 | |||||||||||
Sales Revenue | $ | 15,000 | $ | 18,000 | ||||||||
Cost of GoodsSold | ||||||||||||
Beginning Inventory | $ | 3,000 | $ | 4,000 | ||||||||
Purchases | 7,000 | 12,000 | ||||||||||
GoodsAvailable for Sale | 10,000 | 16,000 | ||||||||||
EndingInventory | 4,000 | 9,000 | ||||||||||
Cost ofGoods Sold | 6,000 | 7,000 | ||||||||||
Gross Profit | 9,000 | 11,000 | ||||||||||
Operating Expenses | 5,000 | 6,000 | ||||||||||
Income from Operations | $ | 4,000 | $ | 5,000 | ||||||||
During the third quarter, the companyâsinternal auditors discovered that the ending inventory for thefirst quarter should have been $4,400. The ending inventory for thesecond quarter was correct. |
a. What effect would the error have on total Income fromOperations for the two quarters combined?
|