An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result:
A) is an overstatement of net earnings.
B) does not affect earnings.
C) is indeterminable from the information given.
D) is an understatement of net earnings.

Question

Quizplus · Accepted Answer

If the acquisition is excluded from inventory, it means that the inventory balance at the end of the year is understated. This, in turn, means that cost of goods sold is overstated, and as a result, net earnings are understated.

An Inventory Acquisition Is Received Late in the Afternoon of December