Asked by Victoria Montanez on Jul 09, 2024
Verified
During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be
A) assets overstated by $70,000; retained earnings understated by $70,000; and net income statement understated by $70,000
B) assets overstated by $70,000; retained earnings understated by $70,000; and no effect on the income statement
C) assets, retained earnings, and net income all overstated by $70,000
D) assets and retained earnings overstated by $70,000; and net income understated by $70,000
Physical Inventory
An actual count of all merchandise or stock on hand at a specific time.
Retained Earnings
Accumulated net income after dividends that is reinvested into the company rather than distributed to shareholders.
Income Statement
An Income Statement is a financial document that shows a company's revenue, expenses, and profits or losses over a specific period.
- Assess the repercussions of inventory discrepancies on financial reporting.
Verified Answer
Learning Objectives
- Assess the repercussions of inventory discrepancies on financial reporting.
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