A review of the R & R Company’s accounting records revealed the following items:

1. Interest of $19,200 that had been earned in 2018 on the company’s investments had not been accrued at the end of 2018. R & R properly accrued earned interest at the end of 2019.

2. Unearned advertising revenue related to advance collections from customers was understated by $27,300 at the end of 2019.

3. The ending inventory taken in 2018 included 5,000 items that were priced in error at $10 each rather than at the correct amount of $2 each.

4. A truck with a cost of $90,000, a service life of 5 years, and a salvage value of $30,000 was debited to Maintenance Expense when it was purchased on January 2, 2018.

5. The physical inventory count on December 31, 2019, improperly excluded merchandise costing $30,000 that had been shipped out on consignment.

Required: In the space provided below, indicate the effects of the items above on R & R’ s net income for 2019, assuming that no entries were made before the books were closed for 2019 to correct any errors. If an item would have caused net income to be understated, then place the number in parentheses () as indicated in the heading to the table.

Effect on 2019 net income over (under) statement

Answer rating: 100% (QA)

Item1Due to this omission of the year 2018 and later on booking of actual interest of 19200 will res... View the full answer