For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors?

Question

BlackTom AI · Accepted Answer

Let’s break down the three misstatements and their expected adjusting entries to see what each would do if properly recorded, then assess the options step by step.

Option 1 analysis: None of the other three
- This would be correct if none of the listed statements (A, B, C) accurately describe the total effect. We’ll evaluate each option to confirm.

Option 2 analysis (expenses are overstated by $6,500):
- If adjustments for supplies used ($1,500) and insurance expired ($5,000) were omitted, the company would not record the corresponding expenses. An omission of an actual expense causes expenses to be understated, not overstated. Therefore, this option is incorrect because it asserts the opposite effect for expenses.

Option 3 analysis (revenues are overstated by $4,200):
- The scenario describes unearned revenue of $4,200 that was earned but not adjusted. If revenue was earned and not recorded as revenue (i.e., the adjusting entry to recognize revenue was omitted), revenues would be understated, not overstated. Hence, this option is incorrect as it states the opposite effect for revenues.

Option 4 analysis (expenses are understated by $3,500):
- The two expense-related omissions amount to $1,500 (supplies used) plus $5,000 (insurance expired) = $6,500 of expenses that should have been recognized but were not. There is no basis for an $3,500 understatement; the correct total understatement for expenses is $6,500. Therefore, this option is incorrect.

Putting it together, each of options B, C, and D misstate the direction or amount of the effects created by the three omitted adjusting entries. The only choice that remains accurate given the evaluations is that none of the other three statements correctly describe the overall effect.

ACCT2200W04 midterm- Requires Respondus LockDown Browser

For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors?

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类似问题

On December 1, Ford Company received three months’ rental income in advance and increased a liability account. On December 31, the end of the accounting period, Ford failed to make an adjusting entry reflecting that a portion of this rent had been earned. This error results in:

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ACCT*2200*W04 midterm- Requires Respondus LockDown Browser

For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors?

查看解析

登录即可查看完整答案

类似问题

On December 1, Ford Company received three months’ rental income in advance and increased a liability account. On December 31, the end of the accounting period, Ford failed to make an adjusting entry reflecting that a portion of this rent had been earned. This error results in:

Received $1,000 invoice for April's utilities expense. (Hint: Bills and invoices reflect goods or services that have been provided, but are unpaid, unless specified otherwise.)

For what are Adjustments used?

At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was omitted. Which of the following statements is true?

Which one is not true?

更多留学生实用工具

希望你的学习变得更简单

ACCT2200W04 midterm- Requires Respondus LockDown Browser