What was the correct ending inventories for Paul company?

During 2011, Paul Company discovered that the ending inventories reported on its financial statements were incorrect by the following amounts: 2009 $60,000 understated 2010 $75,000 Overstated Paul uses the periodic inventory system to ascertain year-end quantities that are converted to dollar amounts using the FIFO cost method.

How are ending inventories reported in financial statements?

During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts: 2019 understated by $ 124,000 2020 overstated by 154,000 WMC uses a periodic inventory system and the FIFO cost method. Required: 1.

What happens when an inventory error is corrected?

Once the correction of the error is disclosed, the financial statements of subsequent years do not need to repeat the disclosures. Inventory errors have an impact on both BS and P&L (Income statements) Work through the accounts from 2010 to 2011 if Ending inventory in 2010 is overstated

How is the ending inventory of a business calculated?

At its most basic level, ending inventory can be calculated by adding new purchases to beginning inventory, then subtracting costs of goods sold.

Why is it important to do an end of period inventory count?

Auditors may require that companies verify the actual amount of inventory they have in stock. Doing a count of physical inventory at the end of an accounting period is also an advantage, as it helps companies determine what is actually on hand compared to what’s recorded by their computer systems.

Can a physical count lead to more accurate ending inventory?

A physical count of inventory can lead to more accurate ending inventory. But for larger businesses, this is often unpractical. Advancements in inventory management software, RFID systems, and other technologies leveraging connected devices and platforms can ease the inventory count challenge.