An insurance premium of 18000 was prepaid in 2010 covering, Ask an Expert

Accounting

Langley Company's December 31 year-end financial statements contained the following errors:
Dec. 31, 2010 Dec. 31, 2011
Ending inventory $7,500 understated $11,000 overstated
Depreciation expense 2,000 understated

An insurance premium of $18,000 was prepaid in 2010 covering the years 2010, 2011, and 2012. The prepayment was recorded with a debit to insurance expense. In addition, on December 31, 2011, fully depreciated machinery was sold for $9,500 cash, but the sale was not recorded until 2012. There were no other errors during 2011 or 2012 and no corrections have been made for any of the errors. Ignore income tax considerations.

What is the total net effect of the errors on Langley's 2011 net income?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M962259

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