Question
Assume that a company fails to write down its inventory at the end of the year. What is the overall net effect on net income
Assume that a company fails to write down its inventory at the end of the year. What is the overall net effect on net income and the accounting equation resulting from this error?
|
| Net Income | Total Assets | Total Liabilities | Total Owners Equity |
| A. | Understated | Understated | Understated | No effect |
| B. | Understated | No effect | Overstated | Understated |
| C. | Understated | Understated | No effect | Understated |
| D. | Overstated | Overstated | No effect | Overstated |
| E. | Overstated | No effect | Understated | Overstated |
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2nd Edition
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