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Effects of Errors on Financial Statements For a recent year, the balance sheet for The Alphabet Soup Company includes accrued

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  • [a]
    If the adjusting entry was not recorded, the expenses would have been understated by $ 706,520.
    Hence, Income before taxes would have been misstated by $ 706,520
  • [b]

Percentage of Misstatement = ($706520 / $ 680000) x 100
= 11.3%

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