Question

For the year ending November 30, 2010, Towson Medical Services Co. mistakenly omitted adjusting entries for (1) $1,430 of supplies that were used, (2) unearned revenue of
$11,150 that was earned, and (3) insurance of $6,000 that expired. Indicate the combined
effect of the errors on (a) revenues, (b) expenses, and (c) net income for the year ended
November 30, 2010.

Answer 1

The combined effect of the errors will be the next:
(a) revenues will increase by $11,150,
(b) expenses will increase by 1,430+6,000 = $7,430,
(c) net income for the year ended November 30, 2010 will increase by 11,150 - 7,430 = $3,720