The 20x4 net income of MXC Inc.was understated by $3,000.This was due to three separate errors.One error was the overstatement of purchases by $2,000; the second error was the understatement of depreciation expense by $1,000.Which of the following errors,in combination with the other two,would cause the $3,000 understatement of income?

Question

Quizplus · Accepted Answer

The overstatement of purchases by $2,000 and the understatement of depreciation expense by $1,000 together cause a $3,000 understatement of income. To balance this, a $2,000 increase in income is needed, which would occur if $2,000 of revenue was not recognized.

The 20x4 Net Income of MXC Inc