1. XYZ Company discovered that its ending inventory on December 31, 2015 was overstated by $10,000 after completing its financial statements. This error affects the 2015 financial statements as follows.

a. Assets are understated and net earnings is overstated.

b. Assets are overstated and net earnings is understated.

c. Assets are understated and net earnings is understated.

d. Assets are overstated and net earnings is overstated.

2. IMQ Limited gathered the following reconciling information in preparing its June bank reconciliation: Cash balance per books, September 30 $12,000

Electronic collection of account 6,000

Outstanding cheques 9,000

Deposits in transit 4,500

Bank service charge 75

NSF Cheque 1,200

The adjusted cash balance per books at September 30 is:

a. $8,775.

b. $12,000.

c. $16,500.

d. $16,725.