# chapter_7_HW - Homework #6 Chapter 7 Homework Problems...

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Homework #6 Chapter 7 Homework Problems E7-17 Analyzing the Effects of an Error in Recording Purchases LO7 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 overstated in 2006. Please indicate whether each of the following financial statement amounts will be understated, overstated, or correct. 1. Net Income for 2006. Choice Selected Understated Correct Overstated 2. Net Income for 2007. Choice Selected Understated Correct Overstated 3. Retained Earnings for December 31, 2006. Choice Selected Overstated Understated Correct 4. Retained Earnings for December 31, 2007. Choice Selected Overstated Correct Understated E7-3 Inferring Missing Amounts Based on Income Statement Relationships LO1

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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 \$ 620 \$ 80 \$ 700 \$ 500 \$ 190 B 950 220 800 120 20 C 170 300 220 420 110 D 800 610 240 270 100 E 1,020 890 1,120 490 (70 ) E7-7 Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO2, 3 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 \$13 For the year 2007: b. Purchase, April 11 9,000 8 c. Purchase, June 1 8,000 14 d. Sales (\$36 each) 11,000 e. Operating expenses (excluding income tax expense), \$195,000 Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for a. Case A: FIFO. b. Case B: LIFO. For each case, show the computation of the ending inventory. 2. Compare the pretax income and the ending inventory amounts between the two cases. 1.
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## This note was uploaded on 04/01/2009 for the course AEM 2210 taught by Professor Little,j. during the Spring '07 term at Cornell University (Engineering School).

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chapter_7_HW - Homework #6 Chapter 7 Homework Problems...

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