Ch. 9_32 - P9-32 1. Net income for 2004 was understated, as...

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Unformatted text preview: P9-32 1. Net income for 2004 was understated, as the $150,000 were not included as assets the company owned. 2. 2005 net income would be overstated $144,850. This would be because the assets would be recorded in the previous year's balance sheet. 150000(.12) = 18000 18000(3) = 4500 12 4500+650 = 5,150 3. 150000 -5150 $144,850 Ultimately, Owners' Equity will correct itself, so there is no error after 2004, but during the year of 2004 OE would be understated by: 150000(.12) = 18000 4500+650 = $5,150 18000(3) = 4500 12 ...
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This note was uploaded on 04/09/2008 for the course ACCT 042 taught by Professor Turlow during the Fall '07 term at Drake University .

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