Use the following information for questions 61 through 63.
Bishop Co. began operations on January 1, 2014. Financial statements for 2014 and 2015 con- tained the following errors: 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.
-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.

Question

Use the following information for questions 61 through 63.
Bishop Co. began operations on January 1, 2014. Financial statements for 2014 and 2015 con- tained the following errors:  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.
-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.

Quizplus · Accepted Answer

The error in recording the depreciation expense understated the expense by $117,200. The error in recording the sales revenue overstated the revenue by $117,600. The net effect of the errors is an understatement of net income by $366,800 ($117,200 + $117,600 - $132,000).

Use the Following Information for Questions 61 Through 63