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For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income?A. expenses are overstated by $6,500B. net income is overstated by $2,300C. revenues are overstated by $4,200D. expenses are understated by $3,500

Respuesta :

Answer:

B. net income is overstated by $2,300

Explanation:

As we know that

Net income = Total revenue - total expenses

where,

Total revenue = Unearned revenue

                        = $4,200

And, the total expense is

= Supplies expense + insurance expense

= $1,500 + $5,000

= $6,500

So, the net income is

= $4,200 - $6,500

= -$2,300

So, the net income is overstated by $2,300

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