Cullumber Inc. began operations on January 1, 2022. Financial statements for 2022 and 2023 contained the following errors: Dec. 31, 2022 Dec. 31, 2023 Ending inventory $32500 too high $41000 too low Depreciation 23000 too high expense Insurance expense 14000 too low 14000 too high Prepaid insurance 14000 too high In addition, on December 31, 2023 fully depreciated equipment was sold for $8600, but the sale was NOT recorded until 2024. No corrections have been made for any of the errors. Ignore income tax considerations. The total effect of the errors on Cullumber's 2023 net income is O understated by $96100. overstated by $27900. O understated by $63600. O overstated by $50900.
Cullumber Inc. began operations on January 1, 2022. Financial statements for 2022 and 2023 contained the following errors: Dec. 31, 2022 Dec. 31, 2023 Ending inventory $32500 too high $41000 too low Depreciation 23000 too high expense Insurance expense 14000 too low 14000 too high Prepaid insurance 14000 too high In addition, on December 31, 2023 fully depreciated equipment was sold for $8600, but the sale was NOT recorded until 2024. No corrections have been made for any of the errors. Ignore income tax considerations. The total effect of the errors on Cullumber's 2023 net income is O understated by $96100. overstated by $27900. O understated by $63600. O overstated by $50900.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Give answer with calculation and provide correct and incorrect option explanation
Transcribed Image Text:Cullumber Inc. began operations on January 1, 2022. Financial statements for 2022 and 2023 contained the following errors:
Dec. 31, 2022
Dec. 31, 2023
Ending inventory
$32500 too high $41000 too low
Depreciation
expense
23000 too high
Insurance expense
14000 too low
14000 too high
Prepaid insurance
14000 too high
In addition, on December 31, 2023 fully depreciated equipment was sold for $8600, but the sale was NOT recorded until 2024. No
corrections have been made for any of the errors. Ignore income tax considerations.
The total effect of the errors on Cullumber's 2023 net income is
O understated by $96100.
overstated by $27900.
O understated by $63600.
O overstated by $50900.
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