Question

Questions 6-9. DIRECTIONS: Answer Questions 6 through 9 based on the information below. ng December 31 Assume that you are assigned to prepare an Audit Report Summary on the L Com The L Company uses the accrual method and has an accounting year ending Decembe The bookkeeper of the company has made the following errors: 1. A $1,500 collection from a customer was received on December 29, 2017, but recorded until the date of its deposit in the bank, January 4, 2018 2. A supplier's $1,900 invoice for inventory items received December 2017 was not recorded until January 2018 (Inventories at December 31, 2017 and 2018 were stated correctly, based on physical count) 3. Depreciation for 2017 was understated by $700 4. In September 2017, a $350 invoice for office supplies was charged to the Utilities Expense account. Office supplies are expensed as purchased 5. December 31, 2017, sales on account of $2,500 were recorded in January 2018, although the merchandise had been shipped and was not in the inventory Assume that no other errors have occurred and that no correcting entries have been made. Ignore all income taxes. 6. After correcting the errors reported above, the corrected Net Income for 20 A. overstated by $100 B. understated by $800 Net Income Capital Asset C. understated by $1,800 -1900 on loomoo 1500 D. neither understated nor overstated 7. Working Capital on December 31, 2017 was A understated by $600 B. understated by $2,300 C. understated by $1,200 D. neither understated nor overstated 8. Total Assets on December 31, 2018 were A. overstated by $1,100 B. overstated by $1,800 -709 +350

Answer 1

	cash	Accounts receivable	Accumulated depreciation	Accounts payable	Depreciation expense	Sales revenue
1	1500	-1500
2				1900
3			700		700
4 (only account title mistake)
5		2500				2500
Total	1500	1000	700	1900	700	2500

6)After all corrections made ,Net income will be correctly reported at .Thus it is neither understated not overstated

correct option is "D"

7)working capital =current asset -current liabilities

                   = [1500+1000] - 1900

                   = 600 understated

correct option is "A"

8)

Total asset is understated by 1500 cash+1000accounts receivable - 700accumulated depreciation = 1800

**It should be understated in option B and not overstated

9)correct option is "D"

Cash is understated by $ 1500