Chapter 14, Problem 4R

Suppose that an audit of Prime Sports Gear encountered the following two errors:

1. a. Inventory totaling $4,500 should have been written off as worthless at the end of the year. Year-end inventory should be only $195,600. Net income is reduced to $117,110.
2. b. Checks totaling $20,000 for some of the salaries payable at year-end had in fact been written and mailed out on December 31, 2013. Thus, both the cash account and the salaries payable account are overstated at year-end.

Correct both errors on the worksheet. Save your completed file as CASHFLOW4. Print the worksheet when done. What impact did each of these adjustments have on cash flow for 2013?