Error Correction MCQs

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During year 3, Paul Company discovered that the ending inventories reported on its financial statements were incorrect by the following amounts: Ye...






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Tack, Inc. reported a retained earnings balance of $150,000 at December 31, year 1. In June year 2, Tack discovered that merchandise costing $40,000...






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Conn Co. reported a retained earnings balance of $400,000 at December 31, year 1. In August, year 2, Conn determined that insurance premiums of $60,...






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Lore Co. changed from the cash basis of accounting to the accrual basis of accounting during year 2. The cumulative effect of this change should be ...






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On January 2, year 2, Air, Inc. agreed to pay its former president $300,000 under a deferred compensation arrangement. Air should have recorded this...






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Net income is understated if, in the first year, estimated salvage value is excluded from the depreciation computation when using the Straight-line...






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At the end of year 1, Ritzcar Co. failed to accrue sales commissions earned during year 1 but paid in year 2. The error was not repeated in year 2. ...






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On December 31, year 1, special insurance costs were incurred and unpaid, but were not recorded. If these insurance costs were related to a particul...






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Which of the following errors could result in an overstatement of both current assets and stockholders’ equity?






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Justin Corporation discovered an error in their year 1 financial statements after the statements were issued. This requires that






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During year 2, Kelly Corporation discovered that ending inventory reported in its year 1 financial statements was understated by $10,000. How should...






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Jackson Company uses IFRS to report its financial results. During the current year, the company discovered it had overstated sales in the prior year...