Dows Company Prepared Income Statements That Reflected Pretax Income of $21,000

question 82

Essay

Dows Company prepared income statements that reflected pretax income of $21,000 for 2013 and $30,000 for 2014. An audit has determined that there were two errors in the inventory amounts as follows: Required:
Determine the correct pretax income amount for each year (show computations; assume the errors were not corrected):

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Definitions:

Reliability

The degree to which an assessment tool produces stable and consistent results across multiple measurements.

Validity

The extent to which a test or instrument measures what it is supposed to measure.

Predictive Validity

The extent to which a score on a scale or test predicts future performance on a related outcome.

Culture Bias

The tendency to interpret or judge phenomena by standards inherent to one's own culture, potentially leading to misunderstanding or prejudice.