Accounting treatment for errors and corrections.
Effects of errors
Show how the following independent errors will affect net income on the Income Statement and the stockholder's equity section of the Balance Sheet using the symbol (O/S) for overstated, (U/S) for understated, and (N/E) for no effect.
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2008
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2009
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Income Statement
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Balance Sheet
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Income Statement
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Balance Sheet
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1. Ending inventory in 2008 overstated.
2. Failed to accrue 2008 interest revenue.
3. A capital expenditure for factory equipment (useful life, 5 years) was erroneously charged to maintenance expense in 2008.
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2008
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2009
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Income Statement
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Balance Sheet
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Income Statement
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Balance Sheet
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4. Failed to count office supplies on hand at 12/31/08. Cash expenditures have been charged to an office supplies expense account during the year 2008.
5.Failed to accrue 2008 wages.
6. Ending inventory in 2008 understated.
7. Overstated 2008 depreciation expense; 2009 expense correct.