Question
Sparky, Inc. follows a calendar-year end. Its financial statements for the years 2018 and 2017 contained errors as follows: Ending Inventory for 2017 was understated
Sparky, Inc. follows a calendar-year end. Its financial statements for the years 2018 and 2017 contained errors as follows:
- Ending Inventory for 2017 was understated by $18,000
- Ending Inventory for 2018 was overstated by $33,000
No correcting entries were made at December 31, 2018. Determine the following:
a. Indicate the effect on 2018 Net Income (ignore taxes. Indicate O for Overstated; U for Understated; or NE for No Error. If your answer is overstated by $4,000, record your answer as O4000.)
b. Indicate the effect on 2018 Ending Retained Earnings (enter your answer same as above).
| Effect on 2018 Net Income | Effect on Ending Retained Earnings at December 31, 2018 |
| $ | $ |
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Financial Reporting and Analysis
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
7th edition
1259722651, 978-1259722653
