For Each of the Following Independent Scenarios,indicate the Effect of the Error

question 42

Essay

For each of the following independent scenarios,indicate the effect of the error (if any)on:
- 2016 net income
- 2017 net income
- 2017 closing retained earnings
Additional information:
- The company uses the periodic system of inventory and its fiscal year-end is December 31.
- Ignore income tax effects.
a.Your analysis of inventory indicates that inventory at the end of 2016 was understated by $20,000 due to an inventory count error.Inventory at the end of 2017 was correctly stated.
b.Invoices in the amount of $59,000 for inventory received in December 2016 were not entered on the books in 2016.They were recorded as purchases in January 2017 when they were paid.The goods were counted in the 2016 inventory count and included in ending inventory on the 2016 financial statements.
c.Goods received on consignment amounting to $99,000 were included in the physical count of goods at the end of 2017 and included in ending inventory on the 2017 financial statements.

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Definitions:

Informational Influence

Social influence stemming from the desire to be correct in situations where the correct action or belief is uncertain, leading individuals to conform to others' expectations.

Social Group

A collection of individuals who interact with each other and share similar characteristics and a sense of unity.

Commitment

refers to the state or quality of being dedicated to a cause, activity, or relationship, often reflected in behavioral persistence and emotional investment.

Door-In-The-Face

A strategy where an initial, larger request is made knowing it will probably be refused, followed by a smaller more reasonable request.