Question

Hudson, Inc. is a calendar-year corporation. Its financial statements for the years 2021 and 2020 contained errors as follows: 2021 2020 Ending inventory $9,000 overstated $24,000 overstated Depreciation expense $6,000 understated $18,000 overstated 94. Assume that no correcting entries were made at December 31, 2020, or December 31, 2021 and that no additional errors occurred in 2022. Ignoring income taxes, by how much will working capital at December 31, 2022 be overstated or understated

Answer 1

Answer:

$3,000 understated

Explanation:

The computation of the working capital in case of no correcting entries made is shown below:

= Depreciation Expense for 2020 - depreciation expense for year 2021 - ending inventory for 2021

= $18,000 - $6,000 - $9,000

= $3,000 understated

While there is no additional errors occurred and no correcting entries passed so in this the $3,000 is understated by above calculation