PE 3-8A Effect of omitting adjustments

For the year ending January 31, 2012, Balboa Medical Co. mistakenly omitted adjusting
entries for (1) depreciation of $7,200, (2) fees earned that were not billed of $33,300, and
(3) accrued wages of $6,000. Indicate the combined effect of the errors on (a) revenues,
(b) expenses, and (c) net income for the year ended January 31, 2012.

Answer:
a. Revenues were understated by $33,300.
b. Expenses were understated by $13,200 ($7,200 + $6,000).
c. Net income was understated by $20,100 ($33,300 – $13,200).