E 9-26 Inventory errors. For each of the following inventory errors occurring in 2011, determine the effect of the error on

For each of the following inventory errors occurring in 2011, determine the effect of the error on

E 9-26 Inventory errors. For each of the following inventory errors occurring in 2011, determine the effect of the error on

ANSWER KEY E 9-26 Inventory errors

For each of the following inventory errors occurring in 2011, determine the effect of the error on 2011's cost of goods sold, net income, and retained earnings. Assume that the error is not discovered until 2012 and that a periodic inventory system is used. Ignore income taxes

U = understand                        O= overstated              NE = no effect

Cost of Goods Sold     Net Income      Retained Earnings

1. Overstatement of ending inventory                          U                     O                     O

2. Overstatement of purchases            

3. Understatement of beginning inventory

4. Freight-in charges are understated

5. Understatement of ending inventory

6. understatement of purchases

7. Understatement of ending inventory

8. Understatement of urchases plus understatement

Of ending inventory by the same amount

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