Show How the Following Independent Errors Will Affect Net Income

question 67

Essay

Show how the following independent errors will affect net income on the Income Statement and the stockholders' equity section of the Balance Sheet using the symbol + (plus) for overstated, - (minus) for understated, and 0 (zero) for no effect. 1. Ending inventory in 2014 overstated."2. Failed to accrue 2014 interestrevenue."3. A capital expenditure for factory equipment (useful life, 5 years) was erroneously charged to Maintenance Expense in 2014. 4. Failed to count office supplies on hand at 12/31/14. Cash expenditures have been charged to Supplies Expense during the year 2014.5. Failed to accrue 2014 wages.6. Ending inventory in 2014 understated."7. Overstated 2014 depreciationexpense; 2015 expense correct."

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Definitions:

Net Investment

The total amount spent on new capital assets minus the depreciation on existing capital assets.

Gross Investment

The total amount of investment in the economy, including investments in the replacement and acquisition of capital assets before accounting for depreciation.

Depreciation

Depreciation is the accounting process of allocating the cost of a tangible or physical asset over its useful life, reflecting the loss of value over time.

Great Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales, specifically referring to the global economic downturn that began in 2007 and lasted until 2009.