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Allen's Hardware Store Prepared the Following Analysis of Cost of Goods

question 228

Essay

Allen's Hardware Store prepared the following analysis of cost of goods sold for the previous three years: $\begin{array}{lrr}& \underline{2015}& \underline{2016}& \underline{2017}\\ \text { Beginning inventory $ 1 / 1 $ } &\$40,000&\$18,000&\$25,000\\ \text {Cost of goods purchased } & \underline{50,000}& \underline{55,000}& \underline{70,000}\\ \text { Cost of goods available for sale } &90,000&73,000&95,000\\ \text { Ending inventory $ 12 / 31 $ } & \underline{18,000}& \underline{25,000}& \underline{40,000}\\ \text {Cost of goods sold } & \underline{\$72,000}&\underline{\$48,000}& \underline{\$55,000}\\ \end{array}$

Net income for the years 2015 2016 and 2017 was $75000 $60000 and $57000 respectively. Since net income was consistently declining Mr. Baden hired a new accountant to investigate the cause(s) for the declines.
The accountant determined the following:
1. Purchases of $20000 were not recorded in 2015.
2. The 2015 December 31 inventory should have been $26000.
3. The 2016 ending inventory included inventory costing $8000 that was purchased FOB destination and in transit at year end.
4. The 2017 ending inventory did not include goods costing $4000 that were shipped on December 29 to Wilson Plumbing Company FOB shipping point. The goods were still in transit at the end of the year.
Instructions
Determine the correct net income for each year. (Show all computations.)

Definitions:

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