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    What is the total effect of the errors on 2005 net income?

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    Rodney Company's December 31 year-end financial statements contained the following errors:

    December 31 , 2004 December 31 , 2005 Ending inventory, $4,000 understated Depreciation expense, $800 understated

    December 31 , 2005
    Ending inventory, $3,600 overstated

    An insurance premium of $3,600 was prepaid in 2004 covering the years 2004, 2005, and 2006. The entire amount was charged to expense in 2004. In addition, on December 31, 2005, fully depreciated machinery was sold for $6,400 cash, but the sale was not recorded until 2006. There were no other errors during 2004 or 2005, and no corrections have been made for any of the errors. Ignore income tax considerations. What is the total effect of the errors on 2005 net income?

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    https://brainmass.com/business/correcting-accounting-errors/total-effect-errors-net-income-80977

    Solution Summary

    The solution discusses the total effect of the errors

    $2.19