Final answer:
RLR Corporation's understated inventory would decrease total assets and net income for 2014 by $36,000 each. This is due to lower reported inventory on the balance sheet and a corresponding higher cost of goods sold on the income statement, reducing net income by the same amount.
Step-by-step explanation:
If RLR Corporation's ending inventory for December 31, 2014, was understated by $36,000, this affects the balance sheet and the income statement of that year. Ending inventory is a component of the total assets on the balance sheet, and it is also used to calculate the cost of goods sold (COGS) on the income statement. An understated inventory would decrease total assets by $36,000 because the inventory account on the balance sheet would be too low.
Regarding net income for 2014, the understatement of inventory would result in a higher COGS, which is subtracted from sales revenue to determine gross profit. This would, in turn, reduce the gross profit and ultimately the net income for the year. The net income would be understated by $36,000, which is the same amount by which the inventory is understated because there would be an apparent increase in COGS by that amount.
To answer the self-check question, the firm's accounting profit would be calculated by subtracting total expenses from sales revenue, which amounts to $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.