If ending inventory of prior year is overstated, retained earnings is understated
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- f. What is the effect of these errors on Net Income, Earnings per Share, Total Liabilities and Retained Earnings if they are not discovered (detected) before the publication of the annual report?TRUE OR FALSE? A prior period error is not included in profit or loss but treated as an adjustment of the beginning balance of retained earnings.WHICH STATEMENT IS FALSE?A. If the net income of prior period is overstated because of the change in accounting policy, the effect is deducted from the beginning retained earnings.B. Equity is also the net assets.C. Prior period errors are shown as adjustment of the ending balance of retained earnings. If the net income of the prior period is overstated, the amount of the error uis deducted from retained earnings.D. In the conversion of preference chares into ordinary shares, if the total par or stated value of the ordinary shares is more than the original issue of the preference shares, the difference is charged to retained earnings.
- Net income at year end will be understated if a. Insurance expense is not recognized b. Accrued income is not recognized c. Inventory at year end is overstated d. Sales revenue during the year is overstatedWhy should the beginning retained earnings be adjusted for prior period errors and effects of change in accounting policy?The cumulative effect of an accounting change should generally be reported as an adjustment to the beginning balance of retained earnings in tin period in which the change is made for a:
- Which of the statements below is false? If the net income of prior period is overstated because of the change in accounting policy, the effect is (A) deducted from the beginning retained earnings. Prior period errors are shown as adjustment of the ending balance of retained earnings. If the net income of (B) the prior period is overstated, the amount of the error uis deducted from retained earnings. Equity is also the net assets. In the conversion of preference chares into ordinary shares, if the total par or stated value of the ordinary D shares is more than the original issue of the preference shares, the difference is charged to retained earnings.TRUE OR FALSE 1. If beginning inventory of prior year is understated, retained earnings is understated. 2. The change in depreciation method is a change in accounting policy. 3. If ending inventory of prior year is overstated, retained earnings is understated 4. The change in accounting estimate should be treated currently and prospectively.Net income at year end will be understated if Group of answer choices A. Inventory at year end is overstated B. Sales revenue during the year is overstated C. Accrued income is not recognized D. Insurance expense is not recognized
- Which of the following items would we report in the income statement just before net income? a. Losses due to the write-down of inventory.b. Gain on the sale of long-term assets.c. Discontinued operations.d. Losses due to restructuring.Corrections of errors in prior period are included inA. Other comprehensive incomeB. Net incomeC. Retained earningsD. Share premiumRequirements: a. What are the net effects of the errors on Biden's 20x1 and 20x2 profit or loss, repesctively? b. What is the effect of the errors on Biden's December 20x2 retained earnings?