Two Separate Errors Affected Rollings Company in 2019

question 116

Multiple Choice

Two separate errors affected Rollings Company in 2019. The beginning inventory was overstated by $12,000 and the ending inventory was overstated by $18,000. Net income in 2019 will be:

• A)overstated by $30,000.
• B)overstated by $12,000.
• C)overstated by $6,000.
• D)understated by $6,000.

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Definitions:

Straight-Line Depreciation

A practice of dividing up the cost of a tangible asset into regular annual segments during its period of use.

Depreciable Cost

The total amount that an asset can be depreciated over its useful life, subtracting any salvage value from the asset's initial cost.

Estimated Useful Life

The expected period of time during which an asset is useful to the owner and can generate revenue.

Initial Cost

The initial expenditure to acquire an asset or start a project, including purchase price, installation fees, and other upfront costs.