MGAB01H3 Chapter Notes - Chapter 8: Inventory Turnover, Soo Line Railroad, Brm P83
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MGAB01H3 Full Course Notes
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An understatement of purchases produces an understatement of cost of sales, which, in turn, produces an overstatement of the current period"s income. Bi + p - ei = cos; both p and cos are understated. An overstatement of purchases produces an overstatement of cost of sales, which in turn, produces an understatement of the current period"s income. Bi + p - ei = cos; both p and cos are overstated. Retained earnings at december 31, 2014, will be overstated because of the overstatement of net earnings for 2014. Retained earnings at december 31, 2015, will be correct because the overstatement of net earnings for 2014 and understatement of net earnings for 2015 will offset one another. End of year no year-end adjusting entry needed because the number of units left at year end is 300 . 60 + 45 135 = 150, which is equal to the physical count of units available at year end.
