Requirements:a. What are the net effects of the errors on Rodney's 20x1 and 20x2 profit or loss, repesctively?b. What is the effect of the errors on Rodney's December 31, 20x2 retained earnings? 17. Rodney Company's Decemberstatements contained the following errors:31 year-end financial20x120x2Ending inventoryDepreciation expense4,000 understated3,600 overstated800 understatedAn insurance premium of P3,600 was prepaid in 20x1 covering theyears 20x1, 20x2, and 20x3. The entire amount was charged toexpense in 20x1. In addition, on December 31, 2002, fullydepreciated machinery was sold for P6,400 cash, but the sale wasnot recorded until 20x3, There were no other errors during 20x1 or20x2, and no corrections have been made for any of the errors.Ignore income tax considerations.(Adapted)Requirements:

1. Insurance Premium paid for 3 years (20*1, 20*2, 20*3) = ¶ 3,600 Insurance Premium paid for 1…

Answered: Requirements: a. What are the net…

Requirements: a. What are the net effects of the errors on Rodney's 20x1 and 20x2 profit or loss, repesctively? b. What is the effect of the errors on Rodney's December 31, 20x2 retained earnings?

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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Question

Requirements:

a. What are the net effects of the errors on Rodney's 20x1 and 20x2 profit or loss, repesctively?

b. What is the effect of the errors on Rodney's December 31, 20x2 retained earnings?

17. Rodney Company's December
statements contained the following errors:
31 year-end financial
20x1
20x2
Ending inventory
Depreciation expense
4,000 understated
3,600 overstated
800 understated
An insurance premium of P3,600 was prepaid in 20x1 covering the
years 20x1, 20x2, and 20x3. The entire amount was charged to
expense in 20x1. In addition, on December 31, 2002, fully
depreciated machinery was sold for P6,400 cash, but the sale was
not recorded until 20x3, There were no other errors during 20x1 or
20x2, and no corrections have been made for any of the errors.
Ignore income tax considerations.
(Adapted)
Requirements:

Definition Definition Amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item

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