Use the following information for the following questions:
Ignore taxes.
Peach Inc.'s financial statements for the years 2019 and 2020 contained errors as follows:
$\begin{array}{c}
\begin{array}{lll}
\
\text {Ending inventory}\
\text { Depreciation Expense}
\end{array}
\begin{array}{c}
\underline{2019}\
\text {\$ 3,000 \quad understated}\
\text {5,500 \quad overstated }
\end{array}
\begin{array}{c}
\underline{2020}\
\text { \$ 5,000 \quad overstated}\
\text {3,500 \quad overstated}
\end{array}
\end{array}$

-Assuming that the errors made in 2019 were corrected, but that the errors made in 2020 were not detected, by what amount will 2020 income before taxes be overstated or understated?
A) $5,000 overstated
B) $8,500 overstated
C) $1,500 understated
D) $1,500 overstated

Question

Use the following information for the following questions: 
Ignore taxes.
Peach Inc.'s financial statements for the years 2019 and 2020 contained errors as follows:
$\begin{array}{c}
\begin{array}{lll}
\
\text {Ending inventory}\
\text { Depreciation Expense}
\end{array}
\begin{array}{c}
\underline{2019}\
\text {\$ 3,000 \quad understated}\
\text {5,500 \quad overstated  }
\end{array}
\begin{array}{c}
\underline{2020}\
\text { \$ 5,000  \quad overstated}\
\text {3,500 \quad  overstated}
\end{array}
\end{array}$

-Assuming that the errors made in 2019 were corrected, but that the errors made in 2020 were not detected, by what amount will 2020 income before taxes be overstated or understated?
A) $5,000 overstated
B) $8,500 overstated
C) $1,500 understated
D) $1,500 overstated

Quizplus · Accepted Answer

Since the errors made in 2019 have been corrected, there will be no impact on the 2020 financial statements. However, since the 2020 errors were not detected, they will result in overstating the income before taxes by a total of $5,000 + $3,500 = $8,500. Therefore, the answer is (D) $1,500 overstated.

Use the Following Information for the Following Questions: Ignore

Use the Following Information for the Following Questions:
Ignore