Inventory Errors

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EXERCISE 13-1A      page 507
INVENTORY ERRORS
Assume that in year 1, the ending merchandise inventory is overstated by $50,000. If this is the only error
in years 1 & 2, indicate which items will be understated, overstated, or correctly stated for years 1 & 2.
The ending inventory amount for the end of year 2 is correct.
Here are some hints:			This year's ending inventory is next year's beginning inventory.
			The Cost of Goods Available for Sale will end up in two places - either it
			has been sold and is now Cost of Goods Sold or it is still on hand in ending
			Inventory. If one of those is overstated the other will be understated.
The Chapter 13 Part I PowerPoint lecture focuses on the effects of inventory errors.
In each box below select one of these choices by moving your cursor
to the box and selecting one of these choices from the drop down menu:							Understated
							Overstated
							Correct
					YEAR 1		YEAR 2
	Ending merchandise inventory
	Beginning merchandise inventory
	Cost of goods sold
	Gross profit
	Net Income
	Ending Owner's Capital