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chapter_7 - Chapter 7 Homework Problems E7-17 Analyzing the...

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Chapter 7 Homework Problems E7-17 Analyzing the Effects of an Error in Recording Purchases Garraway Ski Company mistakenly recorded purchases of inventory on account received during the last week of December 2006 as purchases during January of 2007 (this is called a purchases cutoff error). Garraway uses a periodic inventory system, and ending inventory was correctly counted and reported each year. Assuming that no correction was made in 2006 or 2007, indicate whether each of the following financial statement amounts will be understated, overstated, or correct. 1. Net Income for 2006. Choice Selected Overstated Correct Understated 2. Net Income for 2007. Choice Selected Overstated Correct Understated 3. Retained Earnings for December 31, 2006 Choice Selected Correct Overstated Understated 4. Retained Earnings for December 31, 2007.
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Choice Selected Understated Overstated Correct E7-3 Inferring Missing Amounts Based on Income Statement Relationships Supply the missing dollar amounts for the 2006 income statement of Lewis Retailers for each of the following independent cases: Cases Sales Revenue Beginning Inventory Purchases Total Available Ending Inventory Cost of Goods Sold Gross Profit Expenses Pretax Income or (Loss) A $ 600 $ 100 $ 720 $ 500 $ 190 B 910 180 800 120 0 C 150 300 190 380 120 D 820 610 250 260 120 E 1,020 910 1,080 490 (50) E7-7 Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO Lunar company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2007, the accounting records provided the following information for Product 2: Transactions Units Unit Cost a. Inventory, December 31, 2006 3,000 $12 For the year 2007: b. Purchase, April 11 9,000 10 c. Purchase, June 1 8,000 16 d. Sales ($50 each) 11,000 e. Operating expenses (excluding income tax expense), $193,000 Required: Prepare a separate income statement through pretax income that details cost of goods sold for: Case A: FIFO. Case B: LIFO.
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For each case, show the computation of the ending inventory. Compare the pretax income and the ending inventory amounts between the two cases.
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This homework help was uploaded on 04/21/2008 for the course AEM 2210 taught by Professor Little,j. during the Fall '07 term at Cornell.

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chapter_7 - Chapter 7 Homework Problems E7-17 Analyzing the...

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