Question

Assume a firm reports net income of 84,000 prior to making adjusting entries for expired rent $6400, depreciation 7600 and supplies used 3,000
Assume that the entries have not been made What effect do these errors have on the reported net income

Answer 1

Assume that the entries have not been made. The effect that these errors have on the reported net income is: Net income will be overstated by $17,000.

Net income

Using this formula

Net income=Expired rent+Depreciation+Supplies

Let plug in the formula

Net income=$6400+$7600+$3000

Net income=$17,000 (Overstated)

Therefore the net income will be overstated by $17,000.

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