Give the Correct Response to Each of the Following Events

question 143

Essay

Give the correct response to each of the following events:
(a)An overstatement of accrued wages payable by $2,000 at the end of 20x1 would cause retained earnings at the end of 20x2 to be _____ Overstated; _____ Understated by; _____ correct (assuming no correcting entry).
(b)A $6,000 purchase of merchandise on credit in 20x1 was not recorded in 20x1; but it was recorded in 20x2 when the cash was paid.It was discovered during 20x3.The merchandise was not included in the 20x1 ending inventory.Therefore,20x1 income was: _____ Overstated; _____ Understated by; _____ correct.
(c)The 20x2 ending inventory was Overstated $4,000 and no correcting entry has been made.Therefore the 20x3 net income is: _____ Overstated; _____ Understated by; _____ correct.

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Definitions:

Personal Liability

Refers to the responsibility individuals have for their actions, especially in legal or financial contexts, where they can be held liable for damages or debts.

Sole Proprietorship

An individual pursuing business for a profit.

Life Cycle

The series of stages through which an entity (product, organization, project) passes from its inception to its conclusion or revitalization.

Entrepreneurial Organisations

Businesses characterized by innovative practices, proactive expansion strategies, and a risk-taking mindset in pursuit of opportunities.