Question
Asked Jan 24, 2020
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Indicate the effect—Understate, Overstate, No Effect—that each of the following errors has on 2020 net income and 2021 net income.

 
2020
2021
  • a. Equipment (with a useful life of 5 years) was purchased and expensed in 2018.
  • b. Wages payable were not recorded at 12/31/20.
  • c. Equipment purchased in 2020 was expensed.
  • d. 2020 ending inventory was overstated.
  • e. Patent amortization was not recorded in 2021.
  • _____
  • _____
  • _____
  • _____
  • _____
  • _____
  • _____
  • _____
  • _____
  • _____

 

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Expert Answer

Step 1

Net Income:

The net income is the excess of revenues over expenses after adjusting for depreciation expense and income tax expense. It is also called as net profit. Net income would appear in the last line of the income...

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