For the year ending August 31, 2014, Mammalia Medical Co. mistakenly omitted adjusting entries for

For the year ending August 31, 2014, Mammalia Medical Co. mistakenly omitted adjusting entries for (1) depreciation of $5,800, (2) fees earned that were not billed of $44,500, and (3) accrued wages of $7,300. Indicate the combined effect of the errors on (a) revenues, (b) expenses, and (c) net income for the year ended August 31, 2014.


Answer:
a. Revenues were understated by $44,500.
b. Expenses were understated by $13,100 ($5,800 + $7,300).
c. Net income was understated by $31,400 ($44,500 – $13,100).