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Alexandra [31]
3 years ago
14

ABC, Inc. is a calendar-year corporation. Its financial statements for the years 2021 and 2020 contained errors as follows:

Business
1 answer:
Vesna [10]3 years ago
3 0

Answer: A) $15,000 overstated

Explanation:

Ending Inventory is subtracted from Cost of Goods sold so an overstated Ending Inventory would mean a smaller Cost of Goods sold and hence an overstated Income.

An Understated Depreciation amount would have the same effect because Depreciation is an expense so understating it would mean less expenses subtracted from Income leading to an overstated income.

As both of them will overstate income, the total overstatement would be;

= 9,000 + 6,000

= $15,000

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