At Year End, After Preparing the Financial Statements, Four Errors

question 74

Essay

At year end, after preparing the financial statements, four errors were found. The first line in the tabulation below gives the uncorrected amounts. You are to develop the correct amount on the bottom line by entering the corrections for each error; indicate subtractions with parentheses. Assume a periodic inventory system.
Income Statement for
Balance sheet 12/31/2003, year ending 12/31/2003 $\begin{array}{|l|l|l|l|l|l|l|}\hline &\text { Assets } & \text { Liabilities } & \begin{array}{l}\text { Owners' } \\\text { Equity }\end{array} & \text { Revenue } & \begin{array}{l}\text { Cost of } \\\text { Goods Sold }\end{array} & \begin{array}{l}\text { Gross } \\\text { Margin }\end{array} \\\hline \text { Reported amounts (uncorrected) } & 16,000 & 4,000 & 12,000 & 18,000 & 10,000 & 8,000 \\\hline \text { 1. Beg. } 2003 \text { invoice understated by } \$ 160 & & & & & & \\\hline \begin{array}{l}\text { 2. } 2003 \text { credit purchase } \$ 200 \text {; not recorded or inventoried in } \\\text { 2003. }\end{array} & & \\\hline \text { 3. Ending } 2003 \text { invoice overstated by } \$ 600 & & \\\hline\text { 4. } 2003 \text { credit sales of } \$ 1,000 \text { not recorded in } 2003 \text {; cost of }\\\text { goods sold amount } \$ 600 \text {; not included in } 2003 \text { ending }\\\text { inventory. }\\\hline\end{array}$

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Definitions:

Lessee

A person or entity who leases or rents property from a lessor, obtaining the rights to use and occupy the property according to the terms of the lease agreement.

Title Does Not Pass

A legal principle indicating that the ownership of a property or asset has not been transferred from the seller to the buyer, often due to certain conditions not being met.

CISG

Stands for the United Nations Convention on Contracts for the International Sale of Goods, which provides a uniform framework for international commerce.

Risk Of Loss

The potential that an investment's value may decrease, or that the property may be destroyed, damaged, or lost, impacting the holder's financial position.