Effect of errors on working capital

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Reference no: EM13149372

Both ending inventory and purchases and related accounts payable are understated. (Assume this purchase was recorded and paid for in the following year.)

Ending inventory is overstated, but purchases and related accounts payable are recorded correctly.

Ending inventory is correct, but a purchase on account was not recorded. (Assume this purchase was recorded and paid for in the following year.)

Indicate the effect of each of these errors on working capital, current ratio (assume that the current ratio is greater than 1), retained earnings, and net income for the current year and the subsequent year.

Reference no: EM13149372

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