Emerson Tool plc's December 31 year-end financial statements contained the following errors. An insurance premium of £60,000
Question:
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An insurance premium of £60,000 was prepaid in 2018 covering the years 2018, 2019, and 2020. The entire amount was charged to expense in 2018. In addition, on December 31, 2019, fully depreciated machinery was sold for £15,000 cash, but the entry was not recorded until 2020. There were no other errors during 2018 or 2019, and no corrections have been made for any of the errors. (Ignore income tax considerations.)
Instructions
a. Compute the total effect of the errors on 2019 net income.
b. Compute the total effect of the errors on the amount of Emerson's working capital at December 31, 2019.
c. Compute the total effect of the errors on the balance of Emerson's retained earnings at December 31, 2019.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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a Effect of errors on 2019 net income 21700 overstatement Computations Effect on 2019 net income ove...View the full answer
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Related Book For 
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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