The financial statements of Franklin Company contained the following errors:
A.Was net income for 2019 understated or overstated? Briefly explain your answer.
B.1.Considering the effect of the errors of both years at December 31,2020,is retained earnings overstated or understated,and by what amount?
2.Briefly explain your answer to part B (1).
Definitions:
Pretax Income
The income a company generates before any taxes are deducted.
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