Boswell Electric prepared the following condensed incomestatements for two successive years:
|
Particulars
|
2008
(Rs.)
|
2007
(Rs.)
|
|
Sales
Cost of goods sold
Gross profit on sales
Operating expenses
Net income
|
200,000
150,000
50,000
30,000
20,000
|
160,000
100,000
60,000
20,000
40,000
|
At The end of the year 2007, the inventory was understated byRs. 10,000, but the error was not discovered until after theaccounts had been closed and financial statements prepared at theend of the year 2008. The balance sheets for the two years showedowner's equity of Rs. 50,000 at the end of the year 2007 andRs. 60,000 at the end of the year 2008. (Boswell is organized as asole-proprietorship and does not incur income taxes expense.)
Required:
1. Prepare the corrected income statement for the year 2007 and2008
2. What correction, if any, should be made in the amounts of thecompany's owner's equity at the end of the year 2007and 2008?