Question

Zagat Inc. is a calendar-year corporation. Its financial statements for the years 2017 and 2016 contained errors as follows: 2017 2016 Ending Inventory $9,000 overstated $18,000 overstated Depreciation Expense $6,000 understated $13,500 overstated Assume that the proper correcting entries were made at December 31, 2016. By how much will 2017 income before taxes be overstated or understated?

Answer 1

Answer:

$15,000 overstated

Explanation:

Given:

Ending Inventory = $9,000 (overstated) 2017

Depreciation Expense = $6,000 (understated) 2018

Total overstated gross income = ?

Computation of Total overstated gross income:

Total overstated gross income = Ending inventory + Depreciation expense Total overstated gross income = $9000 + $6000

Total overstated gross income = $15,000 overstated.