Required 1 Required 2 Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. (Ignore income tax expense.) (Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations.) djustments to revenues: djustments to expenses: Income Overstated (Understated)
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- The Effect of Ignoring Adjusting Entries on Net Income For each of the following independent situations, determine whether the effect of ignoring the required adjusting entry will result in an understatement (U), will result in an overstatement (O), or will have no effect (NE) on net income for the period.If the adjustment for unearned revenues is not recorded O a. net income will be correctly stated. O b. net income will be understated. O c. liabilities will be understated. O d. assets will be overstated.State the effect of the following errors if OVERSTATED, UNDERSTATED, or NO EFFECT. NO. ERRORS EFFECT IN 1. Omission of accrued expense in year 2021 Retained Earnings, 12/31/2022 2. Omission of prepaid expense in year 2021 Net income of 2022 3. Omission of accrued income in year 2021 Asset, 12/31/2022 4. Omission of unearned income in year 2021 Income of 2022 5. Sales of 2021 recorded as sales of 2022 Retained Earnings, 12/31/2022 6. Purchases of 2021 recorded as purchases of 2022 Retained Earnings, 12/31/2022 7. Inventory, 12/31/2021 is overstated Net income of 2022 8. Inventory, 1/1/2021 is understated Net income of 2022 9. Depreciation of 2021 is understated Net income of 2022 10. Interest income is recorded as Rent Income Net income
- Its omission at year end will result to understated net income. a. accrued expense and unearned income b. unearned income c. accrued income d. accrued expenseWhat is the effect of omission of prepaid expense in net income during the year of error? a. Overstated b. Cannot be determined based on the given information c. Understated d. No EffectIn year 2022, collection of interest income is credited to Interest Expense. What is the effect of the error in year 2022 revenue and expenses? a. Revenue - understated; expenses - understated b. Revenue - overstated; expenses - overstated c. Revenue - understated; expenses - overstated d. Revenue - overstated; expenses - understated
- In year 2022, collection of interest income is credited to Interest Expense. What is the effect of the error in year 2022 revenue and expenses? a.Revenue - understated; expenses - overstated b.Revenue - overstated; expenses - overstated c.Revenue - understated; expenses - understated d.Revenue - overstated; expenses - understatedAt December 31, 2024, Michelle Walker Corporation reported current assets of $344,933 and current liabilities of $192,700. The following items may have been recorded incorrectly. Walker uses a perpetual inventory system. 1. 2. 3. Goods purchased costing $21,090 were shipped f.o.b. shipping point by a supplier on December 28. Walker received and recorded the invoice on December 29, 2024, but the goods were not included in Walker's inventory because they were not received until January 4, 2025. Goods purchased costing $16,010 were shipped f.o.b. destination by a supplier on December 26. Walker received and recorded the invoice on December 31, but the goods were not included in Walker's 2024 inventory because they were not received until January 2, 2025. Goods held on consignment from Claudia Kishi Company were included in Walker's December 31, 2024, inventory at $12,250.Which of the following journals would correctly post an adjustment for deferred (prepaid) income? Select one: A. DR Income Account / CR Asset B. DR Asset / CR Income Account C. DR Income Account / CR Deferred Income D. DR Deferred income / CR Income Account
- 43. Which of the following statement/s is/are true about reversing entries? * I. Income under accrual basis can be reversed. II. Expenses under cash basis can be reversed. II. Prepaid expense recorded under expense method can be reversed. IV. Unearned income recorded under liability method can be reversed. A. I and III B. Il and IV O C. I, Il and IV O D. I, III and IVAlternative Accounting Treatments a. Estimate the amount of liability and record. b. Do not record as a liability but disclose in a footnote to the financial statements. c. Neither record as a liability nor disclose in a footnote to the financial statements. Required: Match the appropriate alternative accounting treatment with each of the potential contingent liabilities listed below. Potential Contingent Liabilities 1. Income taxes related to revenue included in net income this year but taxable in a future year. 2. Potential costs in future periods associated with performing warranty services on products sold this period. 3. Estimated cost of future services under a product warranty related to past sales. 4. Estimated cost of future services under a product warranty related to future sales. 5. Estimated cost of pension benefits related to past employee services that has yet to be funded. 6. Potential loss on environmental cleanup suit against company; a court judgment against the…Which of the following items is generally a Schedule M-1 adjustment? a.Rent payments b.Gross sales c.Salaries paid d.Federal income tax expense