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When the records of ABC Corporation were reviewed at the close of 2021, the following errors were discovered. For each item, indicate by placing an X in the appropriate column(s) on the answer sheet whether the error resulted in an overstatement, an understatement, or had no effect on net income for the years 2020 and 2021.

Item

1. Failure to record amortization of patent in 2021.

2. Failure to record the correct amount of ending 2020 inventory. The amount was understated because of an error in calculation.

3. Failure to record merchandise purchased in 2020. Merchandise was also omitted from ending inventory in 2020 but was not yet sold.

4. Failure to record accrued interest on notes payable in 2020; that amount was recorded when paid in 2021.

5. Failure to reflect supplies on hand on balance sheet at end of 2020.

2020

Item Overstatement Understatement No Effect

1. ____________________________________________________
2. ____________________________________________________
3. ____________________________________________________
4. ____________________________________________________
5. _____________________________________________________

2021

Item Overstatement Understatement No Effect

1. ____________________________________________________
2. ____________________________________________________
3. ____________________________________________________
4. ____________________________________________________

5. _____________________________________________________

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