Eagle Corp

question 23

Multiple Choice

Eagle Corp. is a calendar-year corporation whose financial statements for 2019 and 2020 included errors as follows: Assume that purchases were recorded correctly and that no correcting entries were made at December 31, 2019 or December 31, 2020. Ignoring income taxes, by how much should Eagle's retained earnings be retrospectively adjusted at January 1, 2021?

• A) $ 32,000 increase
• B) $ 8,000 increase
• C) $ 4,000 decrease
• D) $ 2,000 increase

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Definitions:

Lockbox System

A service provided by banks to companies for the receipt of payment from customers, where payments are sent to a special post office box rather than to the company.

Treasury Bills

Short-term government securities issued at a discount from their face value, with maturities ranging from a few days to 52 weeks.

Collection Time

The average duration it takes for a company to collect payments owed by its customers, often measured in days.

Average Daily Receipts

The average amount of money a business receives on a day-to-day basis over a specified period.