Accrued salaries payable of $102,000 were not recorded at December 31, 2017. Off
ID: 2432506 • Letter: A
Question
Accrued salaries payable of $102,000 were not recorded at December 31, 2017. Office supplies on hand of $58,000 at December 31, 2018 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause
A) 2018 net income to be understated $160,000 and December 31, 2018 retained earnings to be understated $58,000.
B) 2017 net income and December 31, 2017 retained earnings to be understated $102,000 each
C) 2017 net income to be overstated $44,000 and 2018 net income to be understated $58,000
D) 2018 net income and December 31, 2018 retained earnings to be understated $58,000 each.
Explanation / Answer
The error in 2017 is offset in 2018 for Accrued salaries payable so it has no effect on Retained earnings in 2018 2018 net income to be understated $160,000 and December 31, 2018 retained earnings to be understated $58,000. Option A is correct