Answered: What is the effect of omission of…

What is the effect of omission of prepaid expense in net income during the year of error? a. Overstated b. Cannot be determined based on the given information c. Understated d. No Effect

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter4: Income Measurement And Accrual Accounting

Section: Chapter Questions

Problem 4.23E: The Effect of Ignoring Adjusting Entries on Net Income For each of the following independent...

See similar textbooks

Related questions

Q: 1. ABM Company forecasts sales in units for January to May as follows: January 2,500, February 2,700...

A: "Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for y...

Q: How can data analysis be used to identify stakeholders?

A: Stakeholder analysis involves the study of identifying, collecting, and analyzing data on different ...

Q: Valley Spa purchased $8,000 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 12% p...

A: Account receivables are considered negotiable instruments. It is classified in the balance sheet und...

Q: On December 31,2020, the Statement of Financial Position of BEA Partnership shows the following data...

A: Solution Working note Total capitalization after admission of Russia =2000000 Capital interest of Ru...

Q: The Products 4U Inc. manufactures and sells one product which has the following available informatio...

A: Lets understand the basics. Break even point is a point at which no profit/no loss situation is aris...

Q: JD Company decided on January 2, 2022, to effect the change in accounting policies in relation to ba...

A: Carrying value of the Accounts Receivable = Accounts Receivable - Estimated uncollectible accounts w...

Q: Use the following information for the Exercises 12-13 below. (Algo) [The following information appli...

A: Bank Reconciliation statement: To reconcile the differences between cash book and pass book Bank rec...

Q: Name Paper Works Inc. makes paper products and dumps its waste into the Fish River. The waste has ha...

A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a...

Q: On January 2, 2020, Guitar Company leased a warehouse to Violin Corporation under an operating lease...

A: As per IFRS 16, Lease incentive given by lessor is reduced by lessee while computing lease liability...

Q: A factory produces a cheddar snack flavor with a Fixed Factory Overhead Cost of P60,000 and Fixed Se...

Q: 1. Relevant of differential cost analysis a takes all variable and fixed costs into account to analy...

A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new ques...

Q: True or False The purpose of adjusting entries is to assign appropriate portion of revenue and profi...

A: The adjustment entries are prepared at year end to adjust the revenue and expenses of the current pe...

Q: JD Company decided on January 2, 2022 to effect the change in accounting policies in relation to bad...

A: solution Concept Debit balance in allowance for bad debt account Normal balance in allowance for bad...

Q: The following data pertaining to the cash transactions and bank account of ABC Company for May 2022 ...

A: The bank reconciliation statement is prepared to equate the balances of cash book and passbook with ...

Q: xplain the main principles of Direct costing

A: Solution Concept Direct costing This is a method of costing which is based on the di...

Q: Consider the one-sided search model and explain (also use graphs please) the effects of an increase ...

A: The study of behavior of employment ration, unemployment rate and participation rate can be done und...

Q: Exercise 6-13 (Algo) Depreciation calculation methods LO 3 Millco Inc., acquired a machine that cost...

A: Straight line depreciation Cost of the asset - residual value / useful life of asse Accumulated dep...

Q: Illustration 1. Measuring Goodwill/Gain on Bargain Purchase

A: As per standard accounting rules and practices , when we purchase ...

Q: Calculate the ROE for the following information: •Net Income after tax = $2,740,000 •Sales $69,500,0...

A: Formula: Return on Equity = Net Income after tax / Total Equity

Q: Alain company prepared draft financial statements that showed the income before tax for the year end...

A: The given situation relates to events occurring after the balance sheet date. As per this concept th...

Q: A. The trend for cost of goods sold is increasing as a percentage of sales and the trend for total m...

A: Cost of goods sold are the direct allocated cost to the goods manufactured, which have been solved b...

Q: On April 30, 2020, Mindful Company classifies a property in Southern Tagalog as held for sale. The c...

A: Solution Concept The asset is impaired when Carrying value > recoverable amount Recoverable amoun...

Q: Specter Co. combines cash and cash equivalents on the balance sheet. Using the following information...

A: Cash and cash equivalents refers to current assets which are most liquid as they are readily availab...

Q: iler of sailing boats, negotiating the payment delays with your providers and clients. How can you i...

A: Company has to maintain the sufficient cash to operate and maintain the company without which compan...

Q: The following lots of Commodity Z were available for sale during the year. Beginning inventory 10 un...

A: Introduction: LIFO: LIFO stands for Last in First out. Which means Last received inventory to be sol...

Q: Before the allocation of loss, the following items are allocated first, except: A. Salaries to manag...

A: "Since you have asked multiple questions, we will solve first question for you. If you want any spec...

Q: Suppose you are an investment advisor and are looking at two companies to recommend to your clients,...

A: Depreciation Expenses - Depreciation Expenses are the expense incurred on the wear and tear of the f...

Q: On January 1, 2020, CDO Corporation created a special building fund by depositing a single sum of P1...

A: Trust Fund: It is the fund containing assets that is held by the trustees for the beneficiaries. I...

Q: A resident citizen taxpayer sold share of stock of a domestic corporation though the local stock exc...

A: Capital Gains Tax is a tax on capital gains arising upon sale of an asset. It is assumed that the ju...

Q: Sydney Ltd repaired a customers' washing machine and charged the customer $500 which the customer pa...

A: Introduction: Journals: Recording of a business transactions in a chronological order. First step in...

Q: Suppose at the end of the year before any adjusting entries, a company has a balance in Allowance fo...

A: Disclaimer: “Since you have asked multiple question, we will solve the first question for you. If yo...

Q: What is the debt-to-asset ratio of Company B in 2022? What is the debt-to-equity ratio of Company ...

A: Lets understand the basics. Debt to asset ratio indicates that, how much asset is generated through ...

Q: hpute for Book Value per Share of Greys' Corporation given the ff information: dinary share capital,...

A: Formula: BV per share = Shareholder's equity / No.of common stocks.

Q: On 17 January 2021, SA Traders, a debtor of Africa Traders, did a direct deposit payment of R11 0 Tr...

A: JF termed as Journal entries reporting of the transactions into the day book of the business and it ...

Q: Net income for Mory Company for the years 2021 and 2022 is shown below. An audit of the accounts, ho...

A: Answer) Calculation of Correct Net Income for the year 2021 2021 Net Income After Tax ...

Q: On 20 December 2021, Africa Traders did an electronic funds transfer payment of R300 000 for the mon...

A: When the payment for the salary is done, the following journal entry is passed. As the salaries is p...

Q: Salmone Company reported the following purchases and sales of its only product. Salmone uses a perio...

A: Receipts Issue (Cost of goods sold) Balance Date Quantity Price Total Quantity Price Total Quant...

Q: 1. Prepare a Schedule for Profit Distribution. 2. Journal entry to record the distribution of profit...

Q: Lynwood, Inc. produces two different products (Product A and Product X) using two different activiti...

A: Machining cost assigned to product X = No. of machine hours x Machining cost per hour

Q: a. Eti Biswas wants to start her own business in 9 years, and she plans to save funds to invest in t...

A: Since you have asked multiple question, we will solve the first question for you. If you want any sp...

Q: Mark Javier is an active partner in the Javier & Dela Rosa partnership, receives an annual bonus of ...

A: Lets understand the basics. Partnership is a agreement between two or more person who works together...

Q: True or False For any economy study based on our discussions, it is always necessary to determine t...

A: Following is the answer

Q: What is the initial lease liability that must be reported on the balance sheet? Do not round interme...

A: Cost of the Equipment $ 1,50,000.00 Economic Life 3 years Residual Value Nil Rat...

Q: What are the benefits of investing in a company that Rocket Internet has launched?

A: Rocket Internet provides services to the business entity which ensures more qualitative performance ...

Q: If a company discovers a mistake in 2021 that was made in 2018, the company records the adjustment i...

A: An accounting error is a mistake in an accounting entry that is unintentional. When an error or mist...

Q: The standard costs and actual costs for direct materials for the manufacture of 2,600 actual units o...

A: Direct materials price variance = ( Standard rate of material - Actual rate of material ) x Actual q...

Q: Safari Bank granted a loan to a borrower on Jan. 1, 2020. The interest on the loan is 8% payable ann...

A: Initial measurement of loan receivables on Jan 1, 2020 should be made as follows: Amount Prin...

Q: oyCo acquired equipment on April 1, 2022, at a cost of $90,000 and with an estimated useful life of ...

A: Depreciation is the decrease in the value of asset over the useful life of asset. In double declinin...

Q: In a current account, the payee is the debtor and the drawee is the creditor. True False

A: Lets understand the basics. Payee is a person on whom payment is needs to make so he is a creditor. ...

Q: What is the current ratio? Use the information below. Current Assets: $450,000 Costs of Goods Sold: ...

A: Lets understand the basics. Current ratio shows that how much current asset is there in compare to c...

Concept explainers

Bookkeeping

Bookkeeping is the process of recording the financial transactions of a company on a regular basis. With the process of bookkeeping, companies can track important financial information that helps management in making crucial decisions.

Question

What is the effect of omission of prepaid expense in net income during the year of error?

a. Overstated

b. Cannot be determined based on the given information

c. Understated

d. No Effect

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 : Notes

VIEW

Step 2 : Answer

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Determine the effect of the following errors on a companys total revenue, total expenses, and net income. Indicate the effect by writing O for Overstated (too much), U for Understated (too little), or NA for Not Affected.
Corrections of errors that occurred on a previous periods financial statements are called ________. A. restrictions B. deficits C. prior period adjustments D. restatements
What is the effect of omission of accrued income in assets at the end of the year of error? a. Understated b. Overstated c. Cannot be determined from the given information d. NO effect
What is the effect of omission of accrued expenses in assets at the end of the year of error? Group of answer choices a. No effect b. Cannot be determined from the given information c. Overstated d. Understated
What is the effect of omission of accrued expenses in assets at the end of the year of error? a. Understated b. No effect c. Overstated d. Cannot be determined from the given information
If the income statement error is discovered in a subsequent accounting period, what action is to be done by the entity? Group of answer choices a. Reclassify the item to its proper nominal account and restate the income statement of the prior year affected by the error. b. Restate the income statement of the prior year affected by the error. c. No reclassifying entry is necessary but restate the income statement of the prior year affected by the error. d. Reclassify the item to its proper nominal account. Recording of next year's sales as sales of the current year will Group of answer choices a. overstate net income of next year b. not affect retained earnings at the end of next year c. understate retained earnings at the end of the current year d. understate net income of the current year
If the income statement error is discovered in the year of error, what action is to be done by the entity? a. Reclassify the item to its proper nominal account. b. Reclassify the item to real account. c. Adjust the effect to the retained earnings account. d. Ignore the error.
The collection of customer’s account is credited to accounts payable. What is the effect of the error in the net income of the current period and in subsequent period? Group of answer choices A. Cannot be determined based on the given information B. Understated C. Overstated D. No effect
What is the effect of omission of prepaid expense in retained earnings at the end of year 2? Group of answer choices a. No effect b. Cannot be determined from the given information c. Understated d. Overstated
Requirements: a. What are the net effects of the errors on Biden's 20x1 and 20x2 profit or loss, repesctively? b. What is the effect of the errors on Biden's December 20x2 retained earnings?
f. What is the effect of these errors on Net Income, Earnings per Share, Total Liabilities and Retained Earnings if they are not discovered (detected) before the publication of the annual report? t
1.Provide an argument explaining why expenses that were inadvertently omitted in a previous year should be debited directly to retained earnings in the following period in which the error is discovered, rather than recognising them in the profit or loss in the period when the error was discovered.