An examination of the financial records of Jersey Company on 2009
December 31, disclosed the following with regard to merchandise inventory for 2009 and prior years:
2008 December 31, inventory was correct.
2009 December 31, inventory was understated USD 50,000.
2010 December 31, inventory was overstated USD 35,000.
2011 December 31, inventory was understated USD 30,000.
2012 December 31, inventory was correct.
The reported net income for each year was:
|
2009 |
$292,500 |
|
2010 |
$355,000 |
|
2011 |
$382,500 |
|
2012 |
$350,000 |
a. Prepare a schedule of corrected net income for each of the four years, 2009-2012.
b. What errors would have been included in each December 31 balance sheet? Assume each year”s error is independent of the other years” errors.
c. Comment on the implications of the corrected net income as contrasted with reported net income.