ACC 110 Lecture Notes - Net Income, Quick Ratio, Perpetual Inventory

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The inventory on the december 31, 2014 balance sheet is overstated by ,000 and on the income statement cost of goods sold will be understated by ,000 and net income will be overstated by ,000. With a periodic system cost of goods sold is determined using the equation: Cost of goods sold = beginning inventory + purchases ending inventory. If as a result of the count ending inventory is overstated then cost of goods sold must be understated. The company had an opening balance of 300 units, and purchased an additional 800 units for a total of 1100 units. Chetwynd sold 500 units, leaving 600 units in ending inventory. The sum of the amount expensed and ending inventory is off by sh. 40 due to rounding the average price per unit. The company had an opening balance of 5,500 units, and purchased an additional 14,800 units for a total of 20,300 units.

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