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?

Evaluate a company's solvency through long-term financial ratios.

Understand the calculation and significance of basic earnings per share (EPS) and its relevance to investors.

Differentiate between measures of liquidity, profitability, and solvency, and their relevance to different stakeholders.

Analyze the impact of financial transactions on a company's financial position and performance.

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Definitions:

PKU

Phenylketonuria, a genetic disorder resulting in a deficiency in the enzyme responsible for breaking down phenylalanine, leading to harmful levels in the body unless managed by diet.

Monozygotic Twins

Identical twins developed from a single fertilized egg that splits and develops into two embryos with exactly the same genetic material.

Heritable

Characteristics or traits that can be passed from parents to their offspring through genes.

Phenylketonuria

Phenylketonuria (PKU) is a genetic disorder resulting from the body's inability to process part of a protein called phenylalanine, which can lead to intellectual disabilities if untreated.