If a $15,000 purchase of equipment for cash is incorrectly recorded as an increase to equipment and as an increase to cash, at the end of the period assets will:
A) exceed liabilities and stockholders' equity by $15,000.
B) equal liabilities and stockholders' equity.
C) exceed liabilities and stockholders' equity by $30,000.
D) exceed liabilities and stockholders' equity by $40,000.

Question

Quizplus · Accepted Answer

If the $15,000 purchase of equipment for cash is incorrectly recorded as an increase to both equipment and cash, then assets will be overstated by $15,000 and liabilities and stockholders' equity will not be affected. Therefore, the assets will exceed liabilities and stockholders' equity by $15,000, which when added to the initial overstatement of $15,000, will result in an overall overstatement of assets by $30,000.

If a $15,000 Purchase of Equipment for Cash Is Incorrectly