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

question 123

Essay

Speer's Hardware Store prepared the following analysis of cost of goods sold for the previous three years:
Net income for the years 2007, 2008, and 2009 was $70,000, $60,000, and $55,000, respectively. Since net income was consistently declining, Mr. Speer hired a new accountant to investigate the cause(s) for the declines.
The accountant determined the following:
1. Purchases of $25,000 were not recorded in 2009.
2. The 2009 December 31 inventory should have been $24,000.
3. The 2010 ending inventory included inventory costing $5,000 that was purchased FOB destination and in transit at year end.
4. The 2011 ending inventory did not include goods costing $4,000 that were shipped on December 29 to Sampson 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:

Land Reform

Policy changes aimed at creating a more efficient distribution of land ownership in developing countries. Can involve everything from government purchasing large land estates and dividing the land into smaller farms to consolidating tiny plots of land into larger, more efficient private farms.

Institutional Obstacle

Barriers established by social, legal, or political institutions that hinder economic development or the operation of markets.

Extreme Poverty

A condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information. It depends not only on income but also access to services.

Basic Human Needs

Fundamental requirements necessary for individuals to live a healthy and comfortable life, including food, water, shelter, and clothing.