Use the information below to answer the following questions:
Leslie Ltd has found an error in its revenue account: an invoice for $3000 was recorded as revenue in 2011 when it should have been recorded in 2012. The company’s income tax rate is 40% and there was no corresponding error in cost of goods sold.
-What is the effect of the error on 2011 cash from operations?
A) There is no cash effect.
B) It is $1200 too high.
C) It is $1800 too high.
D) It is $3000 too high.

Question

Quizplus · Accepted Answer

The error only affects the timing of revenue recognition and has no direct effect on cash flow, so there is no cash effect in 2011.

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