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Expert-verified Found in: Page 430 ### Intermediate Accounting (Kieso)

Book edition 16th
Author(s) Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Pages 1552 pages
ISBN 9781118743201

# The net income per books of Linda Patrick Company was determined without knowledge of the errors indicated.Net Income Error in EndingYear per Books Inventory2012 $50,000 Overstated$ 3,0002013 52,000 Overstated 9,0002014 54,000 Understated 11,0002015 56,000 No error2016 58,000 Understated 2,0002017 60,000 Overstated 8,000InstructionsPrepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventoryerrors.

The adjusted net income in the given year order are $47,000,$46,000, $74,000,$45,000, $60,000, and$50,000, respectively.

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## Ending inventory effect on net income

Ending inventory has a positive relationship with the net income. Thus overstated inventory would have overstated net income, and understated inventory would have understated net income.

On the contrary, the opening inventory has negative relation with net income.

## Adjusted net income for each of the 6 years

 Year Net Income as per book Error in ending inventory Adjusted net income 2012 $50,000 Overstated by$3,000 $50,000-$3,000 = $47,000 2013$52,000 Overstated by $9,000$52,000-$9,000+$3,000 = $46,000 2014$54,000 Understated by $11,000$54,000 +$11,000 +$9,000 = $74,000 2015$56,000 No error $56,000 -$11,000 = $45,000 2016$58,000 Understated by $2,000$58,000+$2,000 =$60,000 2017 $60,000 Overstated by$8,000 $60,000-$8,000-$2,000 =$50,000

Note: Net income has been adjusted for both beginning and ending inventory. ### Want to see more solutions like these? 