MCQ

Cheyenne Ltd's December 31 year-end financial statements contained the following errors

	December 31, 2019	December 31, 2020
Ending inventory	1500 understated	2200 overstated
Depreciation expense	400 understated

An insurance premium of $3600 was prepaid in 2019 covering the calendar years, 2019, 2020, and 2021. This had been debited to insurance expense. In addition on December 31, 2020, fully depreciated machinery was sold for $1900 cash but the sale was not recorded until 2021. There were no other errors during 2020 or 2021 and no corrections have been made for any of the errors. Ignore income tax considerations.

What is the total net effect of the errors on Cheyenne's net income 2020

a) net income overstated by 2600

b) net income overstated by 3000

c) net income understated by 2900

d) net income overstated by 1500