Sheen Company reported these income statement data for a 2-year period.
Sheen Company uses a periodic inventory system. The inventories at January 1, 2021, and December 31, 2022, are correct. However, the ending inventory at December 31, 2021, is overstated by $8,000.
Instructions
a. Prepare correct income statement data for the 2 years.
b. What is the cumulative eff ect of the inventory error on total gross profi t for the 2 years?
c. Explain in a letter to the president of Sheen Company what has happened—that is, the nature of the error and its eff ect on the fi nancial statements.
