Powell Company Had the Following Errors Over the Last Two

question 125

Multiple Choice

Powell Company had the following errors over the last two years: 2016: Ending inventory was overstated by $30,000 while depreciation expense was overstated by $24,000.
2017: Ending inventory was understated by $5,000 while depreciation expense was understated by $4,000.
By how much should retained earnings be adjusted on January 1, 2018? (Ignore taxes)

• A) Increase by $15,000.
• B) Decrease by $25,000.
• C) Decrease by $6,000.
• D) Increase by $25,000.

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Definitions:

Internal

Pertaining to or happening within an entity, often used in contrast with external factors or influences.

External

refers to something situated on the outside, or beyond the internal or personal; in psychology, it often pertains to factors or influences that originate outside the individual.

Attitudes

A psychological tendency expressed by evaluating a particular entity with some degree of favor or disfavor.

Intention

A mental state involving commitment to carrying out an action or actions in the future.