Homework Help is Here – Start Your Trial Now!
Business
Accounting
pute the effects on revenue, expenses, total assets, total liabilities and equity. Write NE for no effect, Over for overstated, or Under for understated. If your answer is Over or Under, you must also write the amoun

pute the effects on revenue, expenses, total assets, total liabilities and equity. Write NE for no effect, Over for overstated, or Under for understated. If your answer is Over or Under, you must also write the amoun

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Topic Video
Question

Compute the effects on revenue, expenses, total assets, total liabilities and equity. Write NE for no effect, Over for overstated, or Under for understated. If your answer is Over or Under, you must also write the amount. 

A company bought a machine with a 4-year useful life for $30,000 and immediately made an addition (capital expenditure) to the machine for $10,000. However, the addition was recorded as a revenue expenditure. The company uses straight-line depreciation method for all its machines. During the year, the company also made the following transactions: 1. Forgot to record the warranty expense of 20,000 for the products sold. 2. Overcounted the inventory by 30,000 more at the year end. 3. Recorded prepaid fee of 10,000 from customers for a service in the next year as revenue.
Transcribed Image Text:A company bought a machine with a 4-year useful life for $30,000 and immediately made an addition (capital expenditure) to the machine for $10,000. However, the addition was recorded as a revenue expenditure. The company uses straight-line depreciation method for all its machines. During the year, the company also made the following transactions: 1. Forgot to record the warranty expense of 20,000 for the products sold. 2. Overcounted the inventory by 30,000 more at the year end. 3. Recorded prepaid fee of 10,000 from customers for a service in the next year as revenue.
Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Accounting Equation
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS