Asked by Mohammed Saliu on Jun 12, 2024
Verified
During the taking of its physical inventory on December 31, 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
The process of counting all physical merchandise or stock in a store or warehouse to verify records and ensure accuracy in financial accounting.
Balance Sheet
A balance sheet is a financial statement that provides a snapshot of a company’s financial position, showing its assets, liabilities, and equity at a specific point in time.
Income Statement
A financial statement that shows a company's revenues and expenses over a particular period, resulting in a profit or loss.
- Comprehend the consequences of inaccuracies in inventory reporting on financial reports.
Verified Answer
Learning Objectives
- Comprehend the consequences of inaccuracies in inventory reporting on financial reports.
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