Required Information
Exercise 7-9 (Algo) Other accrued liabilities-payroll taxes LO 7-4
[The following Information applies to the questions displayed below.]
At September 30, 2022, the end of the first year of operations at Lukancic Incorporated, the firm's accountant neglected
to accrue payroll taxes of $2,929 that were applicable to payrolls for the year then ended.
Exercise 7-9 (Algo) Part c
c. Assume that when the payroll taxes were paid in October 2022, the payroll tax expense account was charged. Assume that at
September 30, 2023, the accountant again neglected to accrue the payroll tax liability, which was $3,234 at that date. Determine the
Income statement and balance sheet effects of not accruing payroll taxes at September 30, 2023.
? Answer is complete but not entirely correct.
Effect on net income for year ended September 30, 2023:
Net effect is that expenses this year are
$ 395 \times too low and net income this year is $ 395 \times too high
Effect on the September 30, 2023 balance sheet:
Current liabilities are $ 3,234 overstated and the retained earnings account is $ 3,234 overstated
