Accounting Errors for financial statements results
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Barker Co began operations 01/01/04. Financial statements for 2004 and 2005 contained the following errors:
12/31/04 12/31/05
Ending inventory $44,000 too high $52,000 too low
Depreciation Expense 28,000 too high --
Insurance Expense 20,000 too low 20,000 too high
Prepaid Insurance 20,000 too high --
In addition , on 12/31/05 fully depreciated equipment was sold for $9,600 but the sale was not recorded until 2006. No corrections have been made for any of the errors. Ignore income tax consideration.
Question: The total effect of the errors on the amount of Barker's working capital at 12/31/05 working capital is understated by how much?
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Solution Summary
The accounting errors for financial statement results.
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Working Capital is defined as Current Assets - Current Liabilities. The errors in expense and equipment sale does not impact current assets or current liabilities (assuming there is no ...
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