The Management of Dayton Ltd

question 25

Essay

The management of Dayton Ltd. erroneously understated its inventory during 2010 by $28,000. Using the information below and assuming there are no distributions of retained earnings: (1) present a brief analysis with the accurate numbers and the numbers in error and (2) explain whether retained earnings would be overstated, understated, or be indifferent to the error at the end of 2011.
2010 Sales: $60,000
2010 Purchases: $50,000
2010 Cost of Goods Sold (before inventory error) $20,000
2011 Sales: $210,000
2011 Purchases: $60,000
2011 Cost of Goods Sold (based on error numbers): $68,000

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Definitions:

Disempowered Non-reactors

Individuals who lack power or influence and do not actively respond or react to situations or stimuli.

Middle-Class Household

A socioeconomic classification referring to households with an income level, lifestyle, and occupation that place them between the working class and the upper class.

Spending Habits

Patterns or practices of how individuals allocate their money for consumption, saving, and investing, reflecting their priorities, values, and economic conditions.

Counterfeit Products

Imitations of genuine products, designed to take advantage of the superior value and reputation of the imitated product.