q.12

Powell Company had the following errors over the last two years: 2016: Ending inventory was overstated by $54,000 while depreciation expense was overstated by $24,200. 2017: Ending inventory was understated by $13,500 while depreciation expense was understated by $4,200. By how much should retained earnings be adjusted on January 1, 2018? (Ignore taxes)

Multiple Choice

• Decrease by $30,000.

• Increase by $40,500.

• Decrease by $33,500.

• Increase by $33,500.