If Diamond,Inc $\begin{array}{rrr}\text { Effect on 2018 Net Income } & & \text { Effect on 2017 Net Income } \\\end{array}$

question 170

Short Answer

If Diamond,Inc.overstates its ending inventory balance for 2018 by $10,000 and understates its ending inventory balance for 2017 by $5,000 what are the effects on its net income for 2018 and 2017 if either error is corrected?
$\begin{array}{rrr}\text { Effect on 2018 Net Income } & & \text { Effect on 2017 Net Income } \\\end{array}$
a. $\begin{array}{rrr}\text { Overstated by } \$ 15,000 & & \text { Understated by } \$ 10,000 \\\end{array}$
b. $\begin{array}{rrr}\text { Understated by } \$ 5,000 && \text { Overstated by } \$ 10,000 \\\end{array}$
c. $\begin{array}{rrr}\text { Overstated by } \$ 15,000 && \text { Understated by } \$ 5,000 \\\end{array}$
d. $\begin{array}{rrr}\text { Overstated by } \$ 10,000 && \text { Understated by } \$ 5,000\end{array}$

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Definitions:

Fear

A distressing emotion aroused by impending danger, evil, or pain, whether the threat is real or imagined.

Anger

A strong feeling of annoyance, displeasure, or hostility triggered by what one perceives as wrong or threatening.

Magnitude

The size, extent, or importance of something, often quantifiable and used in various contexts to indicate scale or degree.

Immediacy

Describes the perception of closeness, either physically, psychologically, or temporally, to a person or event.