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Ribes An tel Wilhess through IChaos ao kno г с се ееd steeleere heleed ogoo at December 320 in September 20 case weddhause pe
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Answer #1

Solution:

Insurance expense charged in income statement of 2017 = $78,000

Actual insurance expense for 2017= $78,000 / 3 = $26,000

Insurance expense overstated for 2017 = $78,000 - $26,000 = $52,000

Net income understated for 2017 = $52,000 - ($52,000*30%) = $36,400

Adjusted beginning retained earnings in 2018 statement of retained earnings = $260,000 + $36,400 = $296,400

Hence first option is correct.

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