On June 25, Bold Corp. accepted delivery of merchandise which it purchased on ac

Question

On June 25, Bold Corp. accepted delivery of merchandise which it purchased on account. As of June 30, Bold had not recorded the transaction nor included the merchandise in its inventory. The effect of this on Bold’s June 30 balance sheet would be

       a) assets and shareholders’ equity were overstated but liabilities were not affected.

       b) shareholders’ equity was the only item affected by the omission.

       c) assets, liabilities, and shareholders’ equity were understated.

            d)         assets and liabilities were understated but shareholders’ equity was not affected.

Explanation / Answer

when merchandise inventory purchsed on account, these will give impact to asset & liability side in form of closing stock and accounts payable respectively.

Thus ans D assets and liabilities were understated but shareholders’ equity was not affected would be correct.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.