Intermediate Accounting - Chapter 22

Bishop Co. began operations on January 1, 2017. Financial statements for 2017 and 2018 con- tained the following errors:

In addition, on December 31, 2018 fully depreciated equipment was sold for $43,200, but the sale was not recorded until 2019. No corrections have been made for any of the errors. Ignore income tax considerations. The total effect of the errors on the balance of Bishop's retained earnings at December 31, 2018 is understated by:

a. $190,200

b. $478,200

c. $388,200

d. $262,200

Please show work. Thank you!

Dec. 31. 2017 $198,000 overstated 126,000 overstated 90,000 understated 90,000 overstated Dec. 31.2018 $219,000 understated Ending inventory Depreciation expense Insurance expense Prepaid insurance 90.000 overstated