Effects of errors on financial statements For a recent year, the balance sheet for The Campbell Soup Company includes accrued expenses of $598 million. The income before taxes for The Campbell Soup Company for the year was $1,106 million. a. Assume the adjusting entry for $598 million of accrued expenses was not recorded at the end of the year. By how much would income before taxes have been misstated? b. What is the percentage of the misstatement in (a) to the reported income of $1,106 million? Round to one decimal place.
a. If the accrued expenses of $598 million would not have been reocrded at the end of the year, then the net income of $1106 million would have been misstated(overstated) by $598 million. Since the accrued expenses if recorded, would have reduced the net income.
b. Percentage of misstatement to the reported income = $598 million/ $1106 million