Final answer:
The discovery of an overstated 2013 inventory by $50,000 impacts the Statement of Retained Earnings for 2014, as an adjusting entry would decrease the beginning retained earnings. This correcting entry ensures accurate financial reporting for 2014. Additionally, in the self-check question, the firm's accounting profit is calculated as $50,000 by subtracting total expenses from revenue.
Step-by-step explanation:
If a $50,000 error causing 2013 inventory to be overstated is discovered before issuing the report for the year ended December 31, 2014, it would indeed have an impact on the Statement of Retained Earnings for 2014. To correct this error, the entry made would reduce the beginning retained earnings of 2014 to account for the overstatement of net income in 2013. This is because the error resulted in an increase in the ending balance of retained earnings for 2013, which becomes the beginning balance for 2014 once the error is corrected.
To fix this error, the journal entry would be a debit to retained earnings for $50,000 and a credit to inventory for $50,000. This correction entry ensures that the 2014 financial statements report the accurate amounts and that the financial position at the beginning of 2014 is correctly stated. Regarding the self-check question, to calculate the firm's accounting profit, one would subtract the total expenses from the sales revenue. The firm's accounting profit would be:
Sales Revenue - (Labor + Capital + Materials)
$1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000
Therefore, the firm's accounting profit was $50,000 for last year.