ACC 301

In the years indicated, the company made the following errors. Treating each error independently, indicate whether the elements

of the 2009 and 2010 financial statements are overstated, understated, or not affected. The errors were not discovered or corrected.

Use the following code: O = overstated U = understated NE = no effect

2009

2010

#

Error

R

E

NI

A

L

SE

R

E

NI

A

L

SE

1

Failed to record supplies on hand at the end of 2009, supplies are recorded as expenses at time of purchase. The supplieson hand at the end of 2009 were used in 2010.

2

Failed to record correct inventory at the end of 2009 due to a counting error. The counting error understated the invntory.

3

Failed to record a credit purchase of inventory at end of 2009. Inventory was excluded from 2009 ending inventory.

4

Failed to accrue interest on a note payable at the end of 2009. The interest was recognized when paid in 2010.

5

In 2009, recognized as revenue the entire payment received on a 3-year service contract.

6

A computer purchased in 2009 was expensed when purchased.

7

Interest on a note recivable was not accrued at the end of 2009, but was recognized when collected in 2010.

8

Made a math error in computing the 2009 depreciation expense. The 2009 expense was understated.