Staley Watch Company reported the following income statement data for a 2-year period.
2008 2009
| 2008 | 2009 | |
| Ssales | 210,000 | 250,000 |
| Cost of goods sold | ||
| Beginning inventory | 32,000 | 44,000 |
| Cost of goods purchased | 173,000 | 202,000 |
| Cost of goods available for sale | 205,000 | 246,000 |
| Ending inventory | 44,000 | 52,000 |
| Cost of goods sold | 161,000 | 194,000 |
| Gross profit | 49,000 | 56,000 |
Staley uses a periodic inventory system. The inventories at January 1, 2008, and December 31,
2009, are correct. However, the ending inventory at December 31, 2008, was overstated $5,000.
Staley uses a periodic inventory system. The inventories at January 1, 2008, and December 31,
2009, are correct. However, the ending inventory at December 31, 2008, was overstated $5,000.
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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