22 s and Correcting Entry The reported net incomes \'for the first 2 years of US

Question

22 s and Correcting Entry The reported net incomes 'for the first 2 years of US Boo errors were were as follows: 2016, s268,000, and 2017, s412,000. Early in 2018, the following discovered 1. Depreciation of equipment for 2016 was understated $68,500. 2. Depreciation of equipment for 2017 was overstated $39,000. 3. December 31, 2016, inventory was overstated S12,000. 4. December 31, 2017, inventory was understated $73,600. Ignore income tax considerations. Net income for 2016 was a. understated by $60,000. b. overstated by $84,000. c. understated by$80,500 d. none of the above. u mlted-contract method to the percentage- fit figures under

Explanation / Answer

The Answer is C - Net Income for 2016 was understated by $ 80,500

The Correct Net Income will be computed as followes ;

Reported Net Income $ 2,68,000

Less : Depreciation understated ($ 68500)

Less : Overstated value of closing inventory ($ 12,000)

Corrected Net Income $ 1,87,500

Therefore, The net profit for the year 2016 was understated by $ 80,500 ( $ 268000 - $ 187500 )

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