Question

Insigne Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $31,700, and its ending inventory on December 31 was overstated by $16,300. In addition, a purchase of merchandise costing $74,000 was incorrectly recorded as a $7,400 purchase. None of these errors were discovered until the next year. As a result, taxable income for this year was:

Answer 1

Taxable income understated by $82,000

Step-by-step explanation:

Computation:

Particular Amount

Incorrectly recorded purchase $7,400

Add: Ending inventory overstated $16,300

$23,700

Less: Opening inventory overstated $31,700

Less: Purchase of inventory $74,000

Taxable income understated $82,000