A company determines supplies expense for each year by keeping a record of all supplies purchased during the year, and counting the amount of supplies on hand at the end of the year to determine the amount of supplies used during the year. On December 31, Year 1, the employee in charge of counting the supplies accidentally double‐counted $400 worth of supplies. Based on this error, what will be wrong with the reported amount of “Supplies” asset on the December 31, Year 1 balance sheet? What will be wrong with the “Supplies Expense” amount shown on the income statement for the year ended December 31, Year 1? For both of these numbers, tell me whether the number will be overstated or understated, and by how much.
A company determines supplies expense for each year by keeping a record of all supplies purchased during the year, and counting the amount of supplies on hand at the end of the year to determine the amount of supplies used during the year. On December 31, Year 1, the employee in charge of counting the supplies accidentally double‐counted $400 worth of supplies. Based on this error, what will be wrong with the reported amount of “Supplies” asset on the December 31, Year 1
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