The records of Kmeta Inc show the following data for

#8611
The records of Kmeta Inc show the following data for

The records of Kmeta Inc. show the following data for the years ended July 31

After the company's July 31, 2012, year end, the accountant discovers two errors:

1. Ending inventory on July 31, 2010, was actually $33,000, not $24,000. Kmeta had goods held
on consignment at another company that were not included in the inventory account.

2. A purchase of merchandise on account for $5,000 was recorded as a purchase in July 2011
(fiscal 2011) and included in the $40,000 2011 ending inventory balance. It should have been
recorded as a purchase in August 2011 (fiscal 2012). The ending inventory of $40,000 was
correct at the end of July 2012.

Instructions

(a) For each of the three years, prepare both incorrect and corrected income statements
through to profit before income tax.

(b) What is the combined (total) impact of these errors on retained earnings (ignoring any
income tax effects) for the three years before correction? After correction?

(c) Calculate both the incorrect and corrected inventory turnover ratios for 2012 and 2011.

The records of Kmeta Inc show the following data for

ANSWER
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