The Bookkeeper for Duncan Company Made an Error in Recording

question 67

Essay

The bookkeeper for Duncan Company made an error in recording the year-end inventory balance on December 31, 2018. As a result, ending inventory was understated by $37,000.
a)What effect will this error have on cost of goods sold, gross margin, net income, and owner's equity in 2018?
b)As of December 31, 2019, what will be the cumulative effect of this error on owner's equity?

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Definitions:

Required Rate Of Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

Reinvestment Rate Risk

Reinvestment Rate Risk is the risk that the returns from reinvesting cash flows will be lower than initially anticipated due to changes in interest rates.

Annual Interest Payment

The total amount of interest paid on a bond or loan over the course of a year.

Coupon Rate

The percent of the face value paid as interest on a bond every year.