Question: Demonstrate how the following independent errors will affect net income on Income Statement and stockholder's equity section of the Balance Sheet using the sign (O/S) for overstated, (U/S) for understated, & (N/E) for no effect.
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2008
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2009
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Income Statement
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Balance Sheet
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Income Statement
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Balance Sheet
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[A] Ending inventory in 2008 overstated.
[B] Failed to accrue 2008 interest revenue.
[C] A capital expenditure for factory equipment [useful life, five years] was erroneously charged to maintenance expense in 2008.
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2008
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2009
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Income Statement
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Balance Sheet
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[D] Failed to count office supplies on hand at 12/31/08. Cash expenditures have been charged to an office supplies cost account during the year 2008.
[E] Failed to accrue 2008 wages.
[F] Ending inventory in 2008 understated.
[G] Overstated 2008 depreciation expense; 2009 expense correct.