. During the taking of its physical inventory on December 31, 2008, a business i

ID: 2549270 • Letter: #

Question

. During the taking of its physical inventory on December 31, 2008, a business incorrectly counted its inventory as $356,000

instead of the correct amount of $365,000. The effect on the balance sheet and income statement would be as follows:

no effect on balance sheet; net income understated by $9,000.

assets and equity understated by $9,000; net income understated by $9,0

00.

assets understated by $9,000;equity understated by $9,000; no effect on the income statement.

assets understated by $9,000; equity understated by $9,000; net income overstated by $9,000.

B. assets and equity understated by $9,000; net income understated by $9,000.

Assets and equity understated by $9,000($365,000 - $356,000)

Net income understated by $9,000($365,000 - $356,000)

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