Boswell Electric prepared the following condensed income statements for two successive years:
|
Particulars
|
2008
(Rs.)
|
2007
(Rs.)
|
|
Sales
Cost of goods sold
Gross profit on sales
Operating expenses
Net income
|
200,000
150,000
50,000
30,000
20,000
|
160,000
100,000
60,000
20,000
40,000
|
At The end of the year 2007, the inventory wasunderstated by Rs. 10,000, but the error was not discovered untilafter the accounts had been closed and financial statementsprepared at the end of the year 2008. The balance sheets for thetwo years showed owner's equity of Rs. 50,000 at the end ofthe year 2007 and Rs. 60,000 at the end of the year 2008. (Boswellis organized as a sole-proprietorship and does not incur incometaxes expense.)
Required:
- 1. Prepare the corrected income statement for the year 2007 and2008
- 2. What correction, if any, should be made in the amounts ofthe company's owner's equity at the end of the year2007 and 2008?