Only have 20 dollarsI have put the numbers in for the month just need to look at the transcript that matches the problem and the the other paper that matches the problem. fill in the excel sheet.Ashford University | ACC205: Chapter 5 Exercise 1 Accounting 205. This is Professor Blix, and I will review chapter 5, exercise 1.A recent review of the accounting records discovered that the [? 2000×3 ?] ending inventory have beenunderstated by 4,000. So this problem deals with the errors in ending inventory and what effect it has on netincome. We can see up here, they give us the income statement condensed for 2003, and they also give us thecondensed income statement for 2004. And because of this 4,000 error, they want us to correct the incomestatement.Let’s take a closer look at what effect an error in ending inventory has. So what I’ve done over here is I’vereplicated sales of 100,000. Beginning inventory is 0. And I made this up. I put purchases is 80, goods availablefor sale, ending inventory, cost of goods sold, gross profit, expense, net income.Now, I have two columns, one for what they booked with the understatement of 4,000 and what it should be. So Ichanged– they booked 18,000 ending inventory. It was understated. It should have been 22,000. You can see bythat error that cost of goods sold increased from 58 to 62. The gross profit decreased from 42 to 38. Expensesstayed the same. And you can see the effect of that on net income. 16,000 it should have been, and they reported12,000.So by understating inventory, you decrease net income. So the rule to remember is if you want to cheat andincrease ending– excuse me, if you want to cheat and increase net income, you overstate ending inventory.Some companies have done that in the past.You can see down here, I have corrected the income statement. And you see with the error corrected, net incomeshould have been, in 2003, 16,000, and it should have been 9,000 in 2004 versus the 12 and 13.Now, one thing about inventory errors, you notice that net income for these two years cumulative adds up to25,000. And down here, it adds up to 25,000. So it is a self-correcting error. It will correct over two years. But youcan see the understatement of ending inventory by the 4,000 decreased income. They reported 12, should havebeen 16. And in the second year, should have been 13– they reported 13, should have been 9. So you see how itaffects both years. OK. Thank you.The other transcript is below need to download. The numbers you input is in the download that says excel numbers20 mins agoATTACHMENTSacc205__chapter_5_exercise_1.pdfacc205__chapter_5_problem_2.pdfacc205__chapter_6_exercise_2.pdfacc205__chapter_6_problem_2.pdfacc205_week_three_guidance_report.xlsxexcel_numbers.docx
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