The Following Inventory Valuation Errors Were Discovered by Knox Corporation's

question 38

Multiple Choice

The following inventory valuation errors were discovered by Knox Corporation's new controller just after the annual financial statements were published at the end of Year 3.
The year 3 ending inventory was understated by $17,000.
The year 2 ending inventory was understated by $61,000.
The year 1 ending inventory was overstated by $23,000.
The net income for Knox in each of these years was:
$\begin{array}{|l|rr|r|}\hline & \text { Year 3 } & \text { Year 2 } & \text { Year 1 } \\\hline \text { Net income } & \$ 168,000 & \$ 254,000 & \$ 138,000 \\\hline\end{array}$
Assuming there were no income taxes,what was the adjusted net income in each year?
$\begin{array}{|l|r|r|r|}\hline & \text { Year 3 } & \text { Year 2 } & \text { Year 1 } \\\hline \text { A) } & \$ 212,000 & \$ 170,000 & \$ 161,000 \\\hline \text { B) } & \$ 124,000 & \$ 338,000 & \$ 115,000 \\\hline \text { C) } & \$ 90,000 & \$ 338,000 & \$ 161,000 \\\hline \text { D) } & \$ 124,000 & \$ 170,000 & \$ 115,000 \\\hline\end{array}$

• A) Option A
• B) Option B
• C) Option C
• D) Option D

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