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In: Accounting
XYZ Co. began operations on January 1, 2020. Financial statements for 2020 and 2021 contained the...
XYZ Co. began operations on January 1, 2020. Financial statements for 2020 and 2021 contained the following errors:
Dec. 31, 2020 Dec. 31, 2021
Ending inventory $198,000 overstated $219,000 understated
Depreciation expense 126,000 overstated —
No corrections have been made for any of the errors. Ignore income tax considerations.
The total effect of the errors on the balance of XYZ’s retained earnings at December 31, 2021 is overstated or understated by _______
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Expert Solution
| Date | Particulars | Effect on Retained Earning |
| Dec 31, 2020 | Ending Inventory Overstated | $ 198,000 |
| Dec 31, 2020 | Depreciation overstated | $ (126,000) |
| Jan 1, 2021 | Opening Inventoy Overstated | $ (198,000) |
| Dec 31, 2021 | Ending Inventory Overstated | $ 219,000 |
| Dec 31, 2021 | Net Effect on Retained Earnings | $ 93,000 |
Therefore the retained earning as on Dec 31, 2021 is overstated by $93,000
For any clarification, please comment. Kindly Up Vote
ekkarill92 answered 1 year agoRelated Solutions
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