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In preparing the year-end financial statements for 20X7, the controller of Risk 'n save Inc. Discovered that the opening inventory for 20X6 had been overstated by $20,000. The company had a 20% income tax rate.
Problem 1: How will discovery of this error change the amounts previously reported on the company's SFP and SCI for the years prior to 20X7?
Problem 2: What will be the impact on the company's 20X7 reporting? Prepare a journal entry to correct the error at the end of 20X7, if needed.
Financial Statement Analysis and Preparation
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T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .
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