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25 June, 22:52

Partial income statements for Murphy & Murphy (M & M) reported the following summarized amounts:

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Net Sales $ 60,000 $ 59,000 $ 80,000 $ 68,000

Cost of Goods Sold 24,000 26,550 29,050 26,520

Gross Profit $ 36,000 $ 32,450 $ 50,950 $ 41,480

After these amounts were reported, M & M's accountant determined the inventory at the end of Quarter 2 was understated by $2,950. The inventory balance at the end of the other three quarters was accurately stated.

Required:

Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.

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Answers (1)
  1. 25 June, 23:22
    0
    Answer and Explanation:

    According to the scenario, The presentation of the given data are as follows:-

    Partial Income Statement

    Particular Quarter 1 amount ($) Quarter 2 amount ($) Quarter 3 amount ($) Quarter 4 amount ($)

    Net Sales 60,000 59,000 80,000 68,000

    Cost of sold goods 24,000 23,600 32,000 26,520

    Gross Profit 36,000 35,400 48,000 41,480

    ($32,450 + $2,950) ($50,950 - $2,950)

    Quarter 2 was understated by $2,950 at the end of the inventory.

    Quarter 2 cost of sold goods

    = Cost of sold goods - understated amount

    = $26,550 - $2,950

    = $23,600

    Quarter 3 cost of sold goods

    = Cost of sold goods + understated amount

    = $29,050 + $2,950

    = $32,000
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