Use the Following Information for Questions 55 and 56

question 4

Multiple Choice

Use the following information for questions 55 and 56.
Armstrong Inc. is a calendar-year corporation. Its financial statements for the years ended 12/31/14 and 12/31/15 contained the following errors:
-Assume that the 2014 errors were not corrected and that no errors occurred in 2013. By what amount will 2014 income before income taxes be overstated or understated?

• A) $35,000 overstatement
• B) $15,000 overstatement
• C) $35,000 understatement
• D) $15,000 understatement

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Definitions:

Balance Sheet

A balance sheet is a financial statement that showcases an organization's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

U.S. Dollars

The official currency of the United States, widely used as a benchmark and standard for international financial transactions.

Translation Adjustment

An accounting entry that arises when converting financial statements of foreign subsidiaries into the parent company's reporting currency, affecting comprehensive income.

Functional Currency

The currency of the primary economic environment in which an entity operates, generally the currency in which it primarily generates and expends cash.