effect of the errors to the Retained Earnings

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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1. What is the effect of the errors to the Retained Earnings at the beginning of 2019?

2. What is the effect of the errors to the Retained Earnings at the end of 2019?

You have been engaged to audit the accounts of Justine Corporation for the first time in 2019. During
the audit, you discovered the following information:
2018
2019
The following were omitted at each year end:
Salaries Payable
Accrued Interest Income
Unearned Rental Income
Prepaid Insurance
Collections from customers at year-end, recorded as
12,000
4,000
5,000
3,000
15,000
5,000
14,000
3,000
sales but deliveries were not made until the
following year
Payments to suppliers at year-end, recorded as
purchases but merchandise were not received until
the following year
Overstated Depreciation Recorded
31,000
25,000
60,000
80,000
20,000
Ordinary Repairs Expense capitalized at a
depreciation rate of 10%
Unadjusted Net Income
500,000
200,000
310,000
245,000
Transcribed Image Text:You have been engaged to audit the accounts of Justine Corporation for the first time in 2019. During the audit, you discovered the following information: 2018 2019 The following were omitted at each year end: Salaries Payable Accrued Interest Income Unearned Rental Income Prepaid Insurance Collections from customers at year-end, recorded as 12,000 4,000 5,000 3,000 15,000 5,000 14,000 3,000 sales but deliveries were not made until the following year Payments to suppliers at year-end, recorded as purchases but merchandise were not received until the following year Overstated Depreciation Recorded 31,000 25,000 60,000 80,000 20,000 Ordinary Repairs Expense capitalized at a depreciation rate of 10% Unadjusted Net Income 500,000 200,000 310,000 245,000
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