howard lumber company mistakenly classified a product cost as an expense that totaled $20,500. the company produced 2,050 units of product and sold 1,025 of them during the year. management is paid a bonus equal to 2% of net income. in the year in which the mistake was made:

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Answer 1

Answer:

The mistaken classification of the product costas an expense would result in an understatement of the cost of goods sold by $20,500. This would also lead to an overstatement of the net income by the same amount.

To calculate the correct net income for the year, we need to deduct $20,500 from the reported net income.

The cost per unit of the product would be $20,500 divided by 2,050 units, which is $10 per unit.

The cost of goods sold would be 1,025 units sold multiplied by $10 cost per unit, which is $10,250.

Therefore, the corrected net income would be the reported net income minus $20,500, which is the mistaken expense, minus $10,250, which is the corrected cost of goods sold.

If the bonus paid to management is based on net income, then the mistaken classification would have led to a higher bonus payment. The corrected net income would result in a lower bonus payment by 2% of the difference between the reported and corrected net income.

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Answer:

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Explanation:

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