Emerson Tool Company’s December 31 year-end financial statements contained the following errors.

               

An insurance premium of $60,000 was prepaid in 2011 covering the years 2011, 2012, and 2013. The entire amount was charged to expense in 2011. In addition, on December 31, 2012, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2013. There were no other errors during 2011 or 2012, and no corrections have been made for any of the errors (Ignore income tax considerations.)

Instructions
  (a) Compute the total effect of the errors on 2012 net income.
  (b) Compute the total effect of the errors on the amount of Emerson’s working capital at December 31, 2012.
  (c) Compute the total effect of the errors on the balance of Emerson’s retained earnings at December 31, 2012.