Use the following information for questions 55 and 56.
Armstrong Inc. is a calendar-year corporation. Its financial statements for the years ended 12/31/14 and 12/31/15 contained the following errors:
-Assume that the 2014 errors were not corrected and that no errors occurred in 2013. By what amount will 2014 income before income taxes be overstated or understated?
A) $35,000 overstatement
B) $15,000 overstatement
C) $35,000 understatement
D) $15,000 understatement

Question

Use the following information for questions 55 and 56.
Armstrong Inc. is a calendar-year corporation. Its financial statements for the years ended 12/31/14 and 12/31/15 contained the following errors: 
-Assume that the 2014 errors were not corrected and that no errors occurred in 2013. By what amount will 2014 income before income taxes be overstated or understated?
A) $35,000 overstatement 
B) $15,000 overstatement 
C) $35,000 understatement 
D) $15,000 understatement

Quizplus · Accepted Answer

Without specific details on the errors from 2014, we can deduce the correct answer based on general accounting principles. If errors from a previous year were not corrected, and it's stated that income before taxes would be overstated or understated, it implies there were inaccuracies in recording revenues or expenses. An overstatement of $35,000 suggests that either expenses were recorded too low or revenues too high, leading to an inflated income figure.

Use the Following Information for Questions 55 and 56