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question effects of inventory error assume that the ending inventory of a merchandis 4280114

Question

Effects of inventory error Assume that the ending inventory of a merchandising firm is overstated by $ 20,000. Required: a. By how much and in what direction (overstated or understated) will the firm’s cost of goods sold be misstated? b. If this error is not corrected, what effect will it have on the subsequent period’s operating income? c. If this error is not corrected, what effect it will have on the total operating income of the two periods (the period in which there is an error and the subsequent period) combined. Calculate basic EPS, and explain the EPS effect of convertible preferred Thrifty Co. reported net income of $191,150 for its fiscal year ended January 31, 2017. At the beginning of that year, 50,000 shares of common stock were outstanding. On October 31, 2016, an additional 15,000 shares were issued. No other changes in common shares outstanding occurred during the year. Also during the year, the company paid the annual dividend on the 20,000 shares of 6%, $50 par value preferred stock that were outstanding the entire year.

 

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