The adjusting entry for accrued wages was omitted at July 31, the end of the current year. Indicate which items will be in error
, because of the omission, on (a) the income statement for the current year and (b) the balance sheet as of July 31. Also indicate whether the items in error will be overstated or understated.
Accrued wages refers to wages tat have been incurred by an entity that are yet to be paid. it is a liability. To recognize this in the book, debit the wage expense account and credit accrued wages.
Hence, omitting accrued wages would mean that the corresponding wage expense would have been omitted. This would result in an understatement of expenses, an overstatement of net income in the income statement.
In the balance sheet, because the accrued wages account is a liability account, the liabilities would be understated while the owners equity would be overstated (due to the overstatement of net income).
From the question given, we are informed that Best Ever Toys just paid its annual dividend of $1.78 per share and that the required return is 10.6% and the dividend growth rate is 1.23%, then the expected value of this stock five years from now will be: