The Following Errors Were Made in 20x3: an Understatement of Purchases

question 76

Multiple Choice

The following errors were made in 20x3: an understatement of purchases of $500 and an understatement of ending inventory of $500.The net effect on the 20x3 ending amount of retained earnings is:

• A) $1,000 understatement.
• B) $1,000 overstatement.
• C) No effect, the errors offset.
• D) No effect; the errors affect income, not retained earnings.
• E) $500 understatement.

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