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16 November, 01:40

Insigne Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $31,700, and its ending inventory on December 31 was overstated by $16,300. In addition, a purchase of merchandise costing $74,000 was incorrectly recorded as a $7,400 purchase. None of these errors were discovered until the next year. As a result, taxable income for this year was:

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  1. 16 November, 02:06
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    Taxable income understated by $82,000

    Explanation:

    Computation:

    Particular Amount

    Incorrectly recorded purchase $7,400

    Add: Ending inventory overstated $16,300

    $23,700

    Less: Opening inventory overstated $31,700

    Less: Purchase of inventory $74,000

    Taxable income understated $82,000
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