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Casey, Inc
Casey, Inc. is a calendar-year corporation. Its financial statements for the years ended 12/31/23 and 12/31/24 contained the following errors:
2023
2024
Ending Inventory
$8,000 overstatement
$4,000 understatement
Depreciation Expense
$5,000 understatement
$2,000 overstatement
No correcting entries were made in 2023 or 2024. No additional errors were made in 2025.
By what amount will 2024 income before income taxes be overstated or understated?
Select one:
a. $10,000 overstatement
b. $6,000 understatement
c. $15,000 overstatement
d. $9,000 understatement
e. $14,000 understatement
Expert Solution
As the overstatement of depreciation expense decreases the profit and understatement of inventory decreases the profit there would be a total of;
= 4000+ 2000
= 6000 understatement
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