Sideline Company Reported Net Income for 2013 of $70,000 and in 2014

question 75

Essay

Sideline Company reported net income for 2013 of $70,000 and in 2014 of $84,000 (both after income taxes at a 30% rate). It was discovered in 2014 that the ending inventory for 2013 was understated by $2,000 (before any income tax effect).
Required:
Calculate the correct net income (after income tax of 30%) for 2013 and 2014

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Definitions:

Fixed Costs

Expenses that remain constant regardless of business activity levels, including lease payments and insurance premiums.

Short Run

A period in which at least one factor of production is fixed and cannot be changed, limiting the firm's ability to adjust fully to market changes.

Monopolistically Competitive

A market structure characterized by many sellers offering differentiated products, allowing for some degree of market power.

Fixed Costs

Costs that do not vary with the level of output or production, such as rent, salaries, and equipment maintenance.