Bishop Co. began operations on January 1, 2012. Financial statements for 2012 and 2013 con- tained the following errors:

Ending inventory Depreciation expense Insurance expense Prepaid insurance

Dec. 31, 2012 $132,000 too high 84,000 too high

60,000 too low 60,000 too high

Dec. 31, 2013 $166,000 too low

60,000 too high

In addition, on December 31, 2013 fully depreciated equipment was sold for $28,800, but the sale was not recorded until 2014. No corrections have been made for any of the errors. Ignore income tax considerations.

61. The total effect of the errors on Bishop's 2013 net income is

    1. understated by $386,800.

    2. understated by $254,800.

    3. overstated by $137,200.

    4. overstated by $269,200.

62. The total effect of the errors on the balance of Bishop's retained earnings at December 31, 2013 is understated by a. $338,800. b. $278,800.

    c. $194,800. d. $146,800.

63. The total effect of the errors on the amount of Bishop's working capital at December 31, 2013 is understated by

    a. $410,800. b. $326,800. c. $194,800. d. $134,800.