The City Store Reported the Following Amounts on Their Financial

question 79

Essay

The City Store reported the following amounts on their financial statements for Year 1, Year 2, and Year 3:
It was discovered early in Year 4 that the ending inventory on December 31, Year 1 was overstated by $6,000, and the ending inventory on December 31, Year 2 was understated by $2,500. The ending inventory on December 31, Year 3 was correct. Ignoring income taxes determine the correct amounts of cost of goods sold, net income, total current assets, and equity for each of the years Year 1, Year 2, and Year 3.

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Definitions:

Anticipatory Breach

Occurs when one party to a contract indicates, before the performance is due, that they will not fulfill their contractual obligations.

Misrepresentation

An untrue statement of fact; an incorrect or false representation.

Deposit

A sum of money placed in an account or given as security for the fulfillment of a contractual obligation.

Exculpatory Clauses

Provisions in a contract that release one party from liability for harm caused, typically found in waiver and release agreements.