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Problem 5. You were engaged by Kuting Corp. to audit its financial Statements for the first time. In examining the company's books, you discovered that certain adjustments had been overlooked at the end of 2013 and 2014. Moreover, you also discovered that other Items had been erroneously recorded. The said omissions and other failures for each year are noted below: 2014 205, 200 2013 256, 000 582, 400 172, 800 Prepaid Insurance Accrued salaries and wages Accrued interest income Advances from customers Capital expenditures charged as repairs expense Audit notes: a. Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year. b. Capital expenditures had been recorded as repairs but should have been charged to the Machinery account; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%. Based on the above and the result of your audit, answer the following: 313,600 376,000 14. What is the total effect of the errors on the 2014 net income? a. Understated by 251, 000 Overstated by 216, 200 b. a. Understated by 103, 400 b. Overstated by 620, 600 c. Understated by 213, 400 d. Overstated by 253, 800 15. What is the total effect of the errors on the company's working capital as of December 31, 2014? 520,000 142, 000 374,000 348,000 a. Understated by 202, 200 c. Understated by 177, 200 d. Overstated by 546, 800 b. Overstated by 76, 600 16. If remained unadjusted, what will be the effect of the errors to the company's December 31, 2014 accumulated profits? c. Understated by 177, 200 d. Overstated by 570, 600

Problem 5. You were engaged by Kuting Corp. to audit its financial Statements for the first time. In examining the company's books, you discovered that certain adjustments had been overlooked at the end of 2013 and 2014. Moreover, you also discovered that other Items had been erroneously recorded. The said omissions and other failures for each year are noted below: 2014 205, 200 2013 256, 000 582, 400 172, 800 Prepaid Insurance Accrued salaries and wages Accrued interest income Advances from customers Capital expenditures charged as repairs expense Audit notes: a. Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year. b. Capital expenditures had been recorded as repairs but should have been charged to the Machinery account; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%. Based on the above and the result of your audit, answer the following: 313,600 376,000 14. What is the total effect of the errors on the 2014 net income? a. Understated by 251, 000 Overstated by 216, 200 b. a. Understated by 103, 400 b. Overstated by 620, 600 c. Understated by 213, 400 d. Overstated by 253, 800 15. What is the total effect of the errors on the company's working capital as of December 31, 2014? 520,000 142, 000 374,000 348,000 a. Understated by 202, 200 c. Understated by 177, 200 d. Overstated by 546, 800 b. Overstated by 76, 600 16. If remained unadjusted, what will be the effect of the errors to the company's December 31, 2014 accumulated profits? c. Understated by 177, 200 d. Overstated by 570, 600

FINANCIAL ACCOUNTING
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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Problem 5. You were engaged by Kuting Corp. to audit its financial Statements for the first time. In examining the company's books, you discovered that certain adjustments had been overlooked at the end of 2013 and 2014. Moreover, you also discovered that other Items had been erroneously recorded. The said omissions and other failures for each year are noted below: 2014 205, 200 2013 256, 000 400 Prepaid Insurance Accrued salaries and wages Accrued interest income Advances from customers Capital expenditures charged as repairs expense Audit notes: a. Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year. Capital expenditures had been recorded as repairs but should have been charged to the Machinery account; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%. b. Based on the above and the result of your audit, answer the following: 14. What is the total effect of the errors on the 2014 net income? a. Understated by 251, 000 Overstated by 216, 200 b. 15. What is the total effect of the errors on the company's working capital as of December 31, 2014? a. Understated by 103, 400 b. Overstated by 620, 600 582, 172, 800 313,600 376,000 c. Understated by 213, 400 d. Overstated by 253, 800 a. Understated by 202, 200 c. Understated by 177, 200 d. Overstated by 546, 800 b. Overstated by 76, 600 16. If remained unadjusted, what will be the effect of the errors to the company's December 31, 2014 accumulated profits? 520,000 142,000 374,000 348,000 c. Understated by 177, 200 d. Overstated by 570, 600
Transcribed Image Text:Problem 5. You were engaged by Kuting Corp. to audit its financial Statements for the first time. In examining the company's books, you discovered that certain adjustments had been overlooked at the end of 2013 and 2014. Moreover, you also discovered that other Items had been erroneously recorded. The said omissions and other failures for each year are noted below: 2014 205, 200 2013 256, 000 400 Prepaid Insurance Accrued salaries and wages Accrued interest income Advances from customers Capital expenditures charged as repairs expense Audit notes: a. Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year. Capital expenditures had been recorded as repairs but should have been charged to the Machinery account; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%. b. Based on the above and the result of your audit, answer the following: 14. What is the total effect of the errors on the 2014 net income? a. Understated by 251, 000 Overstated by 216, 200 b. 15. What is the total effect of the errors on the company's working capital as of December 31, 2014? a. Understated by 103, 400 b. Overstated by 620, 600 582, 172, 800 313,600 376,000 c. Understated by 213, 400 d. Overstated by 253, 800 a. Understated by 202, 200 c. Understated by 177, 200 d. Overstated by 546, 800 b. Overstated by 76, 600 16. If remained unadjusted, what will be the effect of the errors to the company's December 31, 2014 accumulated profits? 520,000 142,000 374,000 348,000 c. Understated by 177, 200 d. Overstated by 570, 600
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