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The Chalet Inc. is a calendar-year corporation. Its financial statements for the years ended 12/31/17 and 12/31/18 contained the following errors:
2017 2018
Ending inventory $11,000 understatement $14,000 overstatementAdvertising expense 9,500 overstatement 11,500 understatement
Problem 1: Assume that the 2017 errors were not corrected and that no errors occurred in 2016. By what amount will 2017 income before income taxes be overstated or understated?
Option 1: $2,000 overstatementOption 2: $5,000 understatementOption 3: $9,500 overstatementOption 4: $20,500 understatement
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