Use the Following Information for Questions

question 21

Multiple Choice

Use the following information for questions.
Cheyenne Ltd.'s December 31 year-end financial statements contained the following errors: An insurance premium of $3,600 was prepaid in 2016 covering the calendar years 2016, 2017, and 2018.This had been debited to insurance expense.In addition, on December 31, 2017, fully depreciated machinery was sold for $1,900 cash, but the sale was not recorded until 2018.There were no other errors during 2017 or 2018 and no corrections have been made for any of the errors.Ignore income tax considerations.
-What is the total effect of the errors on the balance of Cheyenne's retained earnings at December 31, 2017?

• A)Retained earnings understated by $2,000
• B)Retained earnings understated by $900
• C)Retained earnings understated by $500
• D)Retained earnings overstated by $700

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.