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    Rensing Company

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    Rensing Company's December 31 year-end financial statements contained the following errors:
    Dec 31 2007 Dec 31 2008
    Ending inventory $7,500 understated $11,000 overstated
    Depreciation Expense $2,000 understated

    An insurance premium of $18,000 was prepaid in 2007 covering the years 2007, 2008, and
    2009. The prepayment was recorded with a debit to insurance expense. In addition, on
    December 31, 2008, fully depreciated machinery was sold for $9,500 cash, but the sale was not
    recorded until 2009. There were no other errors during 2008 or 2009 and no corrections have
    been made for any of the errors. Ignore income tax considerations.
    What is the total net effect of the errors on Rensing's 2008 net income? any help would be greatly appreciated.

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    Solution Preview

    Rensing Company's December 31 year-end financial statements contained the following errors:
    Dec 31 2007 Dec 31 2008
    Ending inventory $7,500 understated $11,000 overstated
    Depreciation Expense $2,000 understated

    An insurance premium of $18,000 was prepaid in 2007 covering the years 2007, 2008, and 2009. The prepayment was recorded with a debit to insurance ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the total net effect of the errors on Rensing's 2008 net income.

    $2.19

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