Accrued salaries payable of $98000 were not recorded at December 31, 2020. Office supplies on hand of $56000 at December 31, 2021 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause 2020 net income to be overstated $42000 and 2021 net income to be understated $56000. 2021 net income and December 31, 2021 retained earnings to be understated $56000 each. 2021 net income to be understated $154000 and December 31, 2021 retained earnings to be understated $56000. 2020 net income and December 31, 2020 retained earnings to be understated $98000 each.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Accrued salaries payable of $98000 were not recorded at December 31, 2020. Office supplies on hand of $56000 at December 31, 2021 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause
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