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.

Question

Quizplus · Accepted Answer

The omission means that the inventory (an asset) and the accounts payable (a liability) were not recorded, leading to both being understated. Shareholders' equity is not directly affected by this omission.