While performing its monthly bank reconciliation, the bookkeeper for Mosaic Company discovered that a check written for $421 for advertising expense was recorded in the firm's books as $241. Which of the following shows the effect of correcting the error on the financial statements?

Question

Quizplus · Accepted Answer

The correction of the error will decrease the advertising expense by $180 ($421 - $241), which will result in a decrease in total expenses by $180. As a result, the net income will increase by $180, and the retained earnings will increase by $180. Option A and C show an incorrect increase in advertising expenses and a decrease in net income and retained earnings. Option D shows an incorrect increase in advertising expenses, a decrease in net income, and an incorrect increase in retained earnings.

While Performing Its Monthly Bank Reconciliation, the Bookkeeper for Mosaic