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During the Taking of Its Physical Inventory on December 31

question 165

Essay

During the taking of its physical inventory on December 31, Almond Supplies Company incorrectly counted its inventory as $545,000 instead of the correct amount of $554,000.
(a) Indicate the effects of the misstatement on Almond Supplies Company's balance sheet and income statement for the year ended December 31.
(b) If uncorrected, what would be the effects of the error on next year's balance sheet and income statement?


Definitions:

Market Rate Of Return

The average rate of return anticipated from an investment based on its risk level, historical market performance, and economic conditions.

Mutually Exclusive Projects

Investment projects where the acceptance of one project prevents the acceptance of another.

Crossover Point

The point at which two or more alternative investments have the same net present value or rate of return.

Negatively Correlated Projects

Investments whose returns move in opposite directions, where the success of one is associated with the failure of another.

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