Exercise 6-12 Analysis of inventory errors LO A2 Vibrant Company had $1,100,000 of sales in each of Year 1, Year 2, and

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Exercise 6-12 Analysis of inventory errors LO A2
Vibrant Company had $1,100,000 of sales in each of Year 1, Year
2, and Year 3, and it purchased merchandise costing $600,000 in
each of those years. It also maintained a $400,000 physical
inventory from the beginning to the end of that three-year period.
In accounting for inventory, it made an error at the end of Year 1
that caused its Year 1 ending inventory to appear on its
statements as $380,000 rather than the correct $400,000.

Required:
1. Determine the correct amount of the company’s
gross profit in each of Year 1, Year 2, and Year 3.
2. Prepare comparative income statements to
show the effect of this error on the company's cost of goods sold
and gross profit for each of Year 1, Year 2, and Year 3.
Determine the correct amount of the company’s gross profit in
each of Year 1, Year 2, and Year 3.
Prepare comparative income statements to show the effect of this
error on the company's cost of goods sold and gross profit for each
of Year 1, Year 2, and Year 3.