Use the following information for questions:

Bishop Co. began operations on January 1, 2014. Financial statements for 2014 and 2015 contained the following errors:

Dec. 31, 2014 Dec. 31, 2015

Ending inventory $132,000 too high $146,000 too low

Depreciation expense 84,000 too high —

Insurance expense 60,000 too low 60,000 too high

Prepaid insurance 60,000 too high —

In addition, on December 31, 2015, fully depreciated equipment was sold for $28,800, but the sale was not recorded until 2016. No corrections have been made for any of the errors. Ignore income tax considerations.

28. The total effect of the errors on Bishop's 2015 net income is

a. understated by $366,800.

b. understated by $234,800.

c. overstated by $117,200.

d. overstated by $249,200.

The total effect of the errors on the balance of Bishop's retained earnings at December 31, 2015 is understated by

a. $318,800.

b. $258,800.

c. $174,800.

d. $126,800.

The total effect of the errors on the amount of Bishop's working capital on December 31, 2015, is understated by

a. $390,800.

b. $306,800.

c. $174,800.

d. $114,800.

Answer rating: 100% (QA)

28 A The total effect of the errors on Bishops 2015 net income is understated by 366800 132... View the full answer