Errors – During the course of your examination of the financial statements of Burnett Co., a new client, for the year ended December 31, 2007, you discover the following:
Inventory at January 1, 2007 was understated by $6,000.
Inventory at December 31, 2007 was overstated by $5,000.
During 2007 the company received a $1,000 cash advance from a customer for merchandise to be manufactured and shipped during 2008. It had credited the $1,000 to sales revenue. The company’s gross profit on sales is 50%. Net income reported on the 2007 income statement (before reflecting any adjustments for the above items) is $20,000.
What is the correct net income for 2007?