On January 1st, 2014, Euston Plc. obtained a 3-year bank loan in the amount of $100,000....
- On January 1st, 2014, Euston Plc. obtained a 3-year bank loan in the amount of $100,000. The principal and interest compounded at an annual rate of 10% are due on December 31st, 2016. Euston did not record any transactions related to this loan. In addition, Euston failed to record $2,000 of interest earned on investments and the payment of $5,000 of salaries that had previously been accrued. As a result, net income for the fiscal year ended December 31st, 2014 is (overstated, understated, correct) and if wrong by how much:
Homework Answers
| Net | Income overstated on December 31st 2014 | ||
| less: | Interest expenses = | $ 100000*10% = | ($10,000) |
| add: | Interest earned | = | $ 2,000 |
| less: | Salaries incurred but not paid = | ($5,000) | |
| Net | Income overstated by | = | $ (13,000) |
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On January 1st, 2014, Euston Plc. obtained a 3-year
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