For the year ending April 30, Urology Medical Services Co. mistakenly omitted adjusting entries for (1) $1,400 of supplies that were used, (2) unearned revenue of $6,600 that was earned, and (3) insurance of $9,000 that expired. Indicate the effect of the errors on (a) revenues, (b) expenses, and (c) net income for the year ended April 30.
Answer:
a. Revenues were understated by $6,600.
b. Expenses were understated by $10,400 ($1,400 + $9,000).
c. Net income was overstated by $3,800 ($10,400 – $6,600).