Effects of Errors on Financial Statements

question 13

Essay

Effects of errors on financial statements
Show how the following independent errors will affect net income on the income statement and the shareholders' equity section of the statement of financial position (SFP) using the symbol + (plus) for overstated, - (minus) for understated, and 0 (zero) for no effect.
1. Ending 2019 inventory overstated
2. Failure to accrue 2019 interest revenue
3. A capital expenditure for factory equipment (useful life, 5 years) was charged to expense in error in 2019
4. Failure to accrue 2019 wages
5. Ending inventory in 2019 understated
6. Overstated 2019 depreciation expense; 2020 expense correct

Distinguish between the cost and equity methods of recording investments in subsidiaries.

Identify the adjustments necessary in calculating the ending non-controlling interest (NCI) balance on the consolidated statement of financial position (SFP).

Calculate and understand the impact of the equity method on the consolidated retained earnings balance.

Evaluate the fair valuation of subsidiary's assets and liabilities at acquisition and its subsequent impact on investment accounts.

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Definitions:

Play

A form of activity engaged in for enjoyment, relaxation, or educational purposes, often with rules and interactive elements.

Truth-wins Rule

A principle in group decision-making where the best argument or evidence available overwhelmingly persuades the group, leading to a consensus.

Majority-wins Rule

A decision-making strategy where the option chosen by the majority of participants is selected.

First-shift Rule

A principle or guideline that gives priority or preference to tasks or activities performed during the first part of the workday.