Megan Company was careless about its financial records during its first year of operations, 2013. It is December 31, 2013, the end of the company’s fiscal year. An external auditor examined the records and discovered numerous errors, all of which are described below. Assume that each error is independent of the others.
Analyze each error and indicate its effect on 2013 and 2014 net earnings, assets, and liabilities if not corrected. Do not assume any other errors. Use these codes to indicate the effect of each dollar amount: O = overstated, U = understated, and N = no effect. Write an explanation of your analysis of each transaction to support your response. A sample explanation of analysis of errors that are not corrected is provided below, using the first error as an example:
a. Failure to record depreciation in 2013 caused depreciation expense to be too low; therefore, net earnings was overstated by $ 950. Accumulated depreciation is also too low by $ 950, which causes assets to be overstated by $ 950 until the error is corrected.

  • CreatedAugust 04, 2015
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