Homework SourseThe records of Shen Inc show the following data for the year
The records of Shen Inc. show the following data for the years ended March 31:
After the company’s March 31, 2018, year end, the accountant discovers two errors:
(a)
For each of the three years, prepare both incorrect and corrected income statements through to income before income tax.
INCORRECT
Year Ended July 31Month Ended July 31a July 31
CORRECT
| 2018 | 2017 | 2016 | |||||
| Income statement: | |||||||
| Sales | $ 336,100 | $ 317,000 | $ 296,900 | ||||
| Cost of goods sold | 233,000 | 223,000 | 211,400 | ||||
| Operating expenses | 68,000 | 64,300 | 64,300 | ||||
| Statement of financial position: | |||||||
| Inventory | 39,600 | 39,600 | 24,000 |
Solution
Solution a:
Note: Goods in transit on March 30, 2017 will not have any impact on COGS as transaction was not recorded. If transactin is recorded then purhcase and ending inventroy will increase with same amount, therefore it will not impact COGS. The impact of this transaction will have on ending inventory to be reported in balance sheet.
| Shen Inc. | |||
| Incorrect Income Statement - For year 2018, 2017 and 2016 | |||
| Particulars | 2018 | 2017 | 2016 |
| Sales | $336,100.00 | $317,000.00 | $296,900.00 |
| Cost of goods sold | $233,000.00 | $223,000.00 | $211,400.00 |
| Gross Profit | $103,100.00 | $94,000.00 | $85,500.00 |
| Operating Expenses | $68,000.00 | $64,300.00 | $64,300.00 |
| Income before income tax | $35,100.00 | $29,700.00 | $21,200.00 |
