Task Team of FUNdaMENTAL aCCOUNTiNg School of Business, Sun Yat-sen University Cost of goods sold 84,000$117,000$94,000 Net income 37.000 4800043,000 low it was find that Inventory on December 31, 2000, is overstated by $6,000, and inventory on December 3 1, 2001, is understated by $9,000 Required: (1) For each key financial statement figure prepare a schedule similar to the following to show the adjustments necessary to correct the reported amounts 2000 2001 2002 Reported amount Adjustments 12/31/2000eror 12/31/200 I error Corrected amount (2)What is the error in total net income for the combined three-year period resulting from the s? Explai (3) Explain why the overstatement of inventory by $6,000 at the end of 2000 results in an overstatement of equity by the same amount in that year 4. A physical count of Sky Music Company's inventories taken at December 31 reveals the following m Units on hand Cost Per Unit Market Per Unit 400 Cassettes Tapes 200 DVD 300 12 Video's Required Calculate the lower of cost or market for the inventory (a) as a whole,(b) and applied separately to each item 5. LuLu's Shop was destroyed by a tidal wave Dec. 25, 2004. Fortunately her accountant was able to piece together the following information conceming purchases and sales January I beginning inventory $93, 120 $148, 680 Cost of goods purchase 218,880331,320 Sales 457,200 9,000 Required (1)Use the retail inventory method to estimate the lost inventory (2) LuLu's insurance company has offered to pay her $62, 430 for her lost inventory. Should she accept their offer? 2Task Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University 2 Cost of goods solds $84,000 $117,000 $94,000 Net income 37,000 48,000 43,000 Now it was find that Inventory on December 31, 2000, is overstated by $6,000, and inventory on December 31, 2001, is understated by $9,000. Required: (1) For each key financial statement figure prepare a schedule similar to the following to show the adjustments necessary to correct the reported amounts. Figure: 2000 2001 2002 Reported amount Adjustments: 12/31/2000 error 12/31/2001 error Corrected amount (2) What is the error in total net income for the combined three-year period resulting from the inventory errors? Explain. (3) Explain why the overstatement of inventory by $6,000 at the end of 2000 results in an overstatement of equity by the same amount in that year. 4. A physical count of Sky Music Company’s inventories taken at December 31 reveals the following: Item Units on hand Cost Per Unit Market Per Unit CD’s 400 $5 $6 Cassettes Tapes 200 4 3 DVD’s 300 10 12 Video’s 100 8 6 Required Calculate the lower of cost or market for the inventory (a) as a whole, (b) and applied separately to each item. 5. LuLu’s Shop was destroyed by a tidal wave Dec. 25, 2004. Fortunately her accountant was able to piece together the following information concerning purchases and sales: At Cost At Retail January 1 beginning inventory $93,120 $148,680 Cost of goods purchased 218,880 331,320 Sales 457,200 Sales returns 9,000 Required (1) Use the retail inventory method to estimate the lost inventory. (2) LuLu’s insurance company has offered to pay her $62,430 for her lost inventory. Should she accept their offer?