Question Details

Linden Watch Company reported the following income 



1
Boyer Company applied FIFO to its inventory and got the following results for its ending inventory.
VCRs	140 units at a cost per unit of $65
DVD players	210 units at a cost per unit of $75
iPods	175 units at a cost per unit of $80

The cost of purchasing units at year-end was VCRs $71, DVD players $69, and iPods $78.

Instructions
Determine the amount of ending inventory at lower-of-cost-or- Net realizable value.



2
Linden Watch Company reported the following income statement data for a 2-year period.

	   2011   	    2012   	
Sales	$260,000	$320,000
Cost of goods sold
Beginning inventory	32,000	44,000
Cost of goods purchased	  193,000	  225,000
Cost of goods available for sale	225,000	269,000
Ending inventory	    44,000	    52,000
Cost of goods sold	  181,000	  217,000
Gross profit	$  79,000	$103,000
Linden uses a periodic inventory system. The inventories at January 1, 2011, and December 31, 2012, are correct. However, the ending inventory at December 31, 2011, was overstated $3,000.
Instructions (a)	Prepare correct income statement data for the 2 years. (b)	What is the cumulative effect of the inventory error on total gross profit for the 2 years?




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