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Accounting Errors for Accrued Salaries

36. Accrued salaries payable of $51,000 were not recorded at December 31, 2007. Office supplies on hand of $24,000 at December 31, 2008 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) 2008 net income to be understated $75,000 and December 31, 2008 retained earnings to be understated $24,000.
B) 2007 net income and December 31, 2007 retained earnings to be understated $51,000 each.
C) 2007 net income to be overstated $27,000 and 2008 net income to be understated $24,000.
D) 2008 net income and December 31, 2008 retained earnings to be understated $24,000 each.

Solution Preview

A) 2008 net income to be understated $75,000 and December 31, 2008 retained earnings to be understated $24,000.
B) 2007 net income and December 31, 2007 retained earnings to be understated $51,000 each.
C) 2007 net income ...

Solution Summary

This solution is comprised of a detailed explanation to answer effect of these two errors would cause if neither of these errors was discovered nor corrected.

$2.19