Reference no: EM132525105

Question 1 - A company's income statement for the year ended December 31, 2015 showed a net income of $83,600. Before releasing the financials the auditor found that $18,000 paid for the purchase of a truck had been debited in error to the INVENTORY account. The company adopts the specific identification method with respect to its inventory cost flow assumption, and the truck was not sold during the year of 2015. It is the company's policy to depreciate trucks at 25% per year on the straight line basis, with a full year's charge in the year of acquisition. Assume that there is zero residual value for the truck. What would the net income be after adjusting for this error?

Question 2 - Rich Networks Inc. is being sued by a competitor for infringing on one of its competitor's patents. The company's fiscal year end date is December 31. The suit for $95,000 was filed in court on January 30, 2020 BEFORE the company expects to submit its 2019 annual report to its regulatory body on February 25, 2020. The company's legal counsel estimates that the likelihood of damages being awarded to the competitor is 80%. How much contingent liabilities, if any, should be reported on the balance sheet in the company's 2019 annual report? If you think that the amount is zero, put 0. Otherwise, if you think that the amount is above zero, put that number in your answer.