Ending Inventory for 2012 Is Overstated by $5,500 Due to a Faulty

question 38

Multiple Choice

Ending inventory for 2012 is overstated by $5,500 due to a faulty count and costing.The tax rate is 39%.Assume the same accounting methods for both financial reporting and taxes.The error is discovered late in 2014.The 2014 annual report shows the financial statements for 2012,2013,2014 on a comparative basis. Which of the following is correct regarding the reporting of this error in the 2014 annual report?

• A) A journal entry is made to report the prior period adjustment,and the 2012 and 2013 statements are shown corrected.
• B) No journal entry is needed,and the 2012 and 2013 statements are shown as they were in the 2013 annual report.
• C) No journal entry is needed,and the 2012 and 2013 statements are shown corrected.
• D) A journal entry is made to report the prior period adjustment,and the 2012 and 2013 statements are shown as they were in the 2013 annual report.

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