I-08.05 Problem - I-08.05 Joyce Cathey owns Southwest Golf...

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I-08.05 Joyce Cathey owns Southwest Golf Shop. She has reviewed the following preliminary financial data prepared for the year ending December 31, 20X8: Sales $ 500,000 Cost of goods sold 260,000 Gross profit 240,000 Operating expenses 200,000 Income before tax 40,000 Joyce has determined that the above data were based on assumptions that beginning-of- year inventory was $230,000 and end-of-year inventory was $265,000. The company uses a periodic inventory system. Joyce has owned the golf shop for many years and is surprised and disappointed with these financial results. Accordingly, she has conducted an extensive review of the accounting for selected transactions. Her reviewed turned up the following errors: A spreadsheet of beginning inventory included 35 Zing golf bags at a cost of $20 each. These particular bags were the nicest in the store, and the unit cost was actually $200. The error was the result of incorrect data entry into the spreadsheet. The ending inventory value was the result of a physical count on December 31, 20X8.
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