Accrued salaries payable of $51,000 were not recorded at December 31, 2014. Office supplies on hand of $29,000 at December 31, 2015 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause
A) 2015 net income to be understated $80,000 and December 31, 2015 retained earnings to be understated $29,000.
B) 2014 net income and December 31, 2014 retained earnings to be understated $51,000 each.
C) 2014 net income to be overstated $22,000 and 2015 net income to be understated $29,000.
D) 2015 net income and December 31, 2015 retained earnings to be understated $29,000 each.

Question

Quizplus · Accepted Answer

The accrued salaries payable of $51,000 were not recorded at December 31, 2014. This means that the expenses were understated in 2014 and the liabilities were understated in 2014. The office supplies on hand of $29,000 at December 31, 2015 were erroneously treated as expense instead of supplies inventory. This means that the expenses were overstated in 2015 and the assets were understated in 2015. The net effect of these two errors is that the net income is understated in 2015 by $29,000 and the retained earnings are understated in 2015 by $29,000.

Accrued Salaries Payable of $51,000 Were Not Recorded at December