Assignment
Doubletree Company's financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2010, is understated by $54,000, and inventory on December 31, 2011, is overstated by $24,000.
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For Year Ended December 31
|
2010
|
2011
|
2012
|
|
(a)
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Cost of goods sold
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$
|
729,000
|
$
|
959,000
|
$
|
794,000
|
|
(b)
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Net profit
|
|
272,000
|
|
279,000
|
|
254,000
|
|
(c)
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Total current assets
|
|
1,251,000
|
|
1,364,000
|
|
1,234,000
|
|
(d)
|
Total equity
|
|
1,391,000
|
|
1,584,000
|
|
1,249,000
|
Required:
1. For each key financial statement figure-(a), (b), (c), and (d) above-prepare a table to show the adjustments necessary to correct the reported amounts.
(a)
|
Cost of goods sold:
|
|
2010
|
2011
|
2012
|
|
Reported amount
|
|
$
|
$
|
$
|
|
Adjustments for:
|
12/31/2010 error
|
|
|
|
|
|
12/31/2011 error
|
|
|
|
|
|
|
|
|
|
|
Corrected amount
|
|
$
|
$
|
$
|
|
|
|
|
|
|
(b)
|
Cost of goods sold:
|
|
2010
|
2011
|
2012
|
|
Reported amount
|
|
$
|
$
|
$
|
|
Adjustments for:
|
12/31/2010 error
|
|
|
|
|
|
12/31/2011 error
|
|
|
|
|
|
|
|
|
|
|
Corrected amount
|
|
$
|
$
|
$
|
|
|
|
|
|
|
(c)
|
Total current assets
|
|
2010
|
2011
|
2012
|
|
Reported amount
|
|
$
|
$
|
$
|
|
Adjustments for:
|
12/31/2010 error
|
|
|
|
|
|
12/31/2011 error
|
|
|
|
|
|
|
|
|
|
|
Corrected amount
|
|
$
|
$
|
$
|
|
|
|
|
|
|
(d)
|
Equity:
|
|
2010
|
2011
|
2012
|
|
Reported amount
|
|
$
|
$
|
$
|
|
Adjustments for:
|
12/31/2010 error
|
|
|
|
|
|
12/31/2011 error
|
|
|
|
|
|
|
|
|
|
|
Corrected amount
|
|
$
|
$
|
$
|
|
|
|
|
|
|
2. What is the error in total net profit for the combined three-year period resulting from the inventory errors? Explain.