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Could anyone help with Question 3 (chapter 18) from Course Notes, please?
The draft accounts of Anthea Co. for the year ended 31 December 20X9 include the following:
Revenue $80,000
Gross profit $20,000
It was subsequently discovered that revenue had been understated by $10,000 and closing inventory overstated by $5,000. After correction of these errors the gross progit percentage will be:
A. 33,3%
B. 16,7%
C. 31,3%
D. 27,8%As for my considerations the answer should be B. 16,7%:
Corrected revenue should be: $80,000 + $10,000 = $90,000 (revenue is higher then we received from draft accounts).
Corrected gross profit should be: $20,000 – $5,000 = $15,000 (closing inventory should be smaller -> so COGS should be higher -> gross profit should be smaller).
Gross profit percentage: $15,000 / $90,000 = 16,7%.But the answer in Course Notes shows us D…
Dear sangria9,
The answer is D.
I agree that the revenue is 90,000, but regarding profit you have taken only closing inventory into consideration and not the increase of the revenue.
The gross profit is: 20,000 + 10,000 – 5,000 = 25,000
Gross profit percentage: $25,000 / $90,000 = 27,8%Hope it helps 🙂
Warm regards,
Tammi
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