81. Langley Company's December 31 year-end financial statements contained the following errors: Ending inventory Depreciation expense Dec. 31, 2023 $37,500 understated 10,000 understated Dec. 31, 2024 $55,000 overstated An insurance premium of $90,000 was prepaid in 2023, covering the years 2023, 2024, and 2025. The prepayment was recorded with a debit to insurance expense. In addition, on December 31, 2024, fully depreciated machinery was sold for $47,500 cash, but the sale was not recorded until 2025. There were no other errors during 2024 or 2025, and no corrections have been made for any of the errors. Ignore income tax considerations. What is the total effect of the errors on the balance of Langley's retained earnings at December 31, 2024?

81. Langley Company's December 31 year-end financial statements contained the following errors: Ending inventory Depreciation expense Dec. 31, 2023 $37,500 understated 10,000 understated Dec. 31, 2024 $55,000 overstated An insurance premium of $90,000 was prepaid in 2023, covering the years 2023, 2024, and 2025. The prepayment was recorded with a debit to insurance expense. In addition, on December 31, 2024, fully depreciated machinery was sold for $47,500 cash, but the sale was not recorded until 2025. There were no other errors during 2024 or 2025, and no corrections have been made for any of the errors. Ignore income tax considerations. What is the total effect of the errors on the balance of Langley's retained earnings at December 31, 2024?

Name: Rr.22. 81. Langley Company's December 31 year-end financial statements
Uploaded: 2024-03-20T06:32:37.000Z
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Description: Rr.22. 81. Langley Company's December 31 year-end financial statements contained the followingerrors:Ending inventoryDepreciation expenseDec. 31, 2023$37,500 understated10,000 understatedDec. 31, 2024$55,000 overstatedAn insurance premium of $90,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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Question

Rr.22.

81. Langley Company's December 31 year-end financial statements contained the following
errors:
Ending inventory
Depreciation expense
Dec. 31, 2023
$37,500 understated
10,000 understated
Dec. 31, 2024
$55,000 overstated
An insurance premium of $90,000 was prepaid in 2023, covering the years 2023, 2024, and
2025. The prepayment was recorded with a debit to insurance expense. In addition, on December
31, 2024, fully depreciated machinery was sold for $47,500 cash, but the sale was not recorded
until 2025. There were no other errors during 2024 or 2025, and no corrections have been made
for any of the errors. Ignore income tax considerations. What is the total effect of the errors on
the balance of Langley's retained earnings at December 31, 2024?

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