During the taking of its physical inventory on December 31, 20xx, Mary’s Boutiqu

Question

During the taking of its physical inventory on December 31, 20xx, Mary’s Boutique incorrectly counted its inventory as $360,000 instead of the correct amount of $280,000.   The effect on the balance sheet and income statement would be:

Please fill in the following blanks by stating overstated or understated by $xxx

Example:
overstated by $400,000
understated by $400,000

Part 1: Assets ___________ by ___________
Part 2: Retained Earnings ___________ by ___________
Part 3: Net Income ___________ by ___________

In order to earn credit for your answers to the problems, you are required to show all supporting work.

Explanation / Answer

all of the three have similar impact, since COGS will drop

overstated by 400,000

overstated by 400,000

overstated by 400,000

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