Use the Following Information for Questions 92 Through 94

question 140

Multiple Choice

Use the following information for questions 92 through 94.
Hudson, Inc. is a calendar-year corporation. Its financial statements for the years 2015 and 2014 contained errors as follows:
-Assume that no correcting entries were made at December 31, 2014, or December 31, 2015 and that no additional errors occurred in 2016. Ignoring income taxes, by how much will working capital at December 31, 2016 be overstated or understated?

• A) $0
• B) $ 4,000 overstated
• C) $ 4,000 understated
• D) $10,000 understated

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Definitions:

Storeroom

A room or area used for storing materials, tools, and equipment, typically within a manufacturing or production facility.

Job-Order Costing

A technique in accounting aimed at recording expenses and assessing the income potential of single tasks or collections.

Direct Labor Costs

Wages and other expenses for employees who are directly involved in the manufacturing of products.

Direct Materials

Raw materials that can be directly attributed to the production of specific goods or services, forming a significant component of manufacturing costs.