X Company prepares monthly financial statements. The balance in Unearned (Deferred) Revenue on October 1 is $1,126. As of October 31, $371 of the $1,126 had been earned, but the accountant failed to record the appropriate adjusting entry. What was the effect on the October 31 Balance Sheet?

In January, X Company, a merchandiser, purchased inventory on account. The accountant incorrectly recorded the transaction as an increase in Inventories and a decrease in Retained Earnings. As a result, which of the following is true regarding the January financial statements?