Rivers inc. reported taxable income of $85,000 and total ending assets of $500,000 for 2019. Rivers later determines that purchases were understated by $25,000 in 2019 and inventory was understated by $10,000 at the end of 2019.

What are the corrected amounts for taxable income and total assets for 2019?

Net income Total Assets

i)$100,000 490,000

ii)70,000 510,000

iii)100,000 510,000

iv)120,000 490,000

a.i

b.ii

c.iii

d.iv

Assume that the errors in 2019 were not corrected and no additional errors occurred in 2020. What is the effect of the 2019 errors on cost of goods sold (COGS) for 2020, net income for 2020, and retained earnings for 2020?

COGS Net income Retained earnings

i) understatement overstatement overstatement

ii)understatement overstatement no effect

iii)overtstamet understatement understatement

iv)overstatement understatement no effect

a.i

b.ii

c.iii

d.iv

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