Assume that a firm reports net income of $87,000 prior to making adjusting entries for the following items: expired rent, $6,700; depreciation expense, $7,900; and supplies used, $3,300. Assume that the required adjusting entries have not been made. What effect do these errors have on the reported net income?

Question

Mathematics

Rodrigo Olson

31 January, 00:23

Assume that a firm reports net income of $87,000 prior to making adjusting entries for the following items: expired rent, $6,700; depreciation expense, $7,900; and supplies used, $3,300. Assume that the required adjusting entries have not been made. What effect do these errors have on the reported net income?

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Answers (1)

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Kelvin Mosley · Answer 1

Income is overstated by an amount $17900

Step-by-step explanation:

As these expenses have not been entered the not deducted from the income the income is overstated by an amount $ 17900. The actual income should be

$ 69,100

Income is the difference between the revenues and the expenses. If these expenses are wrongly or not entered then the income statement is affected.

It is overstated if entries are not made and understated if un-necessary entries are made.