Accrued salaries payable on $7,500 had not been recorded on Dec 31, 2014. Office supplies on hand of $2,500 at Dec 31 2014 were erroneously treated as expense instead of inventoy.

Neither of these errors were discovered or corrected.

1. a, understated by $5,000 b. overstated by $5,000 c. understated by $10,000 d. overstated by $10,000

2. The effect of these errors on the retained earnings at Dec 31, 2014 would be

a. understated by $2,5000 b. overstated by $2,500 c. understated by $5,000 d. overstated by $5,000