This question will be sent to your instructor for grading. Item2 6 points Item Skipped eBookPrintReferencesCheck my workCheck My Work button is now disabledItem 2 Pat Colt is auditing the financial statements of Manning Company. The following is a summary of the uncorrected misstatements that Colt has identified during the past three years. These misstatements are immaterial and have related to isolated matters. In this summary, parentheses imply that the misstatements would have reduced balances if they ha

ear	Effect on Net Income			Effect on Assets			Effect on Liabilities			Effect on Equity
2017	$	(82,500)		$	(100,000)		$	(17,500)		$	(82,500)
2018		(22,000)			(25,500)			(3,500)			(22,000)
2019		30,000			30,000			0			30,000

During the most recent audit, Colt concluded that expenses totaling $130,000 were recognized in January 2021 (when Manning paid them) but should have been recognized in 2020.

Required: a. What is the dollar impact of the misstatement identified in 2020 on each of the following (assume a 21% tax rate for Manning)?

Net income

Assets

Liabilities

Equity

b. Describe the rollover method of evaluating uncorrected misstatements. Assume that performance materiality was set at $170,000. How would Colt evaluate the materiality of the misstatement under the rollover method? What adjustments (if any) would Colt propose to Mannings financial statements?

c. Describe the iron curtain method of evaluating uncorrected misstatements. Assume that performance materiality was set at $170,000. How would Colt evaluate the materiality of the $130,000 misstatement in 2020 under the iron curtain method? What adjustments (if any) would Colt propose to Mannings financial statements?

d. What is the total misstatement amount to consider when evaluating materiality under each of the following methods:

Iron curtain method

Rollover method

e. Under each method, what is the minimum amount of adjustment Colt would propose to Manning's Company's financial statements?

Iron curtain method

Rollover method