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DIRECTIONS: Answer questions 26 through 29 on the basis of the intolat A statement of income for the Dartmouth Corporation for the 2004 fiscal year follows: $34.000 20.000 $14,000 7.000 $ 7,000 Sales $89,000 Cost of Goods Sold 20.000 Gross Margin Expenses Net Income before Income Taxes Provision for Income Taxes (50%) Net Income The following errors were discovered relating to the 2004 fiscal year: Closing inventory was overstated by $2,100. Sales included $3,500 of deposits received from customers for future orders. listed under Expenses. This was subject to 10% amortization taken for a full year. Accrued salaries of $850 were not included in Cost of Goods Sold. Interest receivable of $500 was omitted. A $3,000 expenditure was capitalized during fiscal year 2004 that should have been Assume that the books were not closed and that you have prepared a corrected income statement. Answer questions 26 through 29 on the basis of your corrected income statement. 26. D $27,550 The gross margin after accounting for adjustments SHOULD BE A. $37,500 B. $35,400 $31,900 27. The adjusted income before income taxes SHOULD BE A. $5,350 B. $9,550 C. $15,000 D. $15,850 28. The adjusted income after provision for a 50% tax rate SHOULD BE A. $7,925 B. $7,500 C. $4,500 D. $2,675 29. After making adjustments, sales to be reported for fiscal year 2004 SHOULD BE A. unchanged B. increased by $3,500 C. decreased by $3,500 D. reduced by $2,100

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