Question

# q.12 Powell Company had the following errors over the last two years: 2016: Ending inventory was...

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.

Error in inventory is a counterbalance error which means the error made in 2016 ending inventory was adjusted when opening stock of 2017 was overstated.

So we have to give effect of remaining 3 errors.

Overstatement of depreciation in 2016 resulted in decrease in earnings. So we have to increase it.

Understated depreciation in 2017 result in increased earnings so we have to decrease it.

Understated ending inventory in 2017 resulted in decrease in earnings so we have to increase it.

= \$24200 increase + \$13500 increase - \$4200 decrease

= \$33500 increase

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Need Online Homework Help?

Most questions answered within 1 hours.

##### Active Questions
• Given the alternating series:    n=2∞(-1)^n/ln(n) (7 pts) Determine if the series converge absolutely.    (Use the fact...
• 1. Why was it necessary for the government to bail out the banking industry? 2. How...
• A 140-g baseball traveling at 79.2 mi/h strikes the catcher's mitt which, in bringing the ball...
• Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .094,...
• At Litchfield College of Nursing, 85% of incoming freshmen nursing students are female and 15% are...
• if q1 is at (2,2)cm and Q2 is at (-5,-5)cm and they have equal charges -...