Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of

Question:

Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of the errors on 2020 net income?
a. Net income understated by $1,800
b. Net income overstated by $5,800
c. Net income overstated by $11,000
d. Net income overstated by $14,200

Shannon Corporation began operations on January 1, 2019. Financial statements for the years ended December 31, 2019 and 2020, contained the following errors:

December 31 2019 2020 Ending inventory $16,000 Understated Insurance expense $10,000 Overstated $15,000 Overstated $10,0

In addition, on December 31, 2020, fully depreciated machinery was sold for $10,800 cash, but the sale was not recorded until 2021. There were no other errors during 2019 or 2020, and no corrections have been made for any of the errors.

Financial Statements
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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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