Roseland Company uses the periodic method of accounting for inventory.Unfortunately, the sales manager of Roseland Company failed to record a valid sale on account of merchandise that had been shipped to a customer prior to the end of the current year. However, he did exclude the merchandise from inventory at the end of the current year.As a result of this error, Roseland Company's
A)total assets are overstated for the current year.
B)total expenses are understated for the current year.
C)net income is overstated for the current year.
D)total assets are understated at the end of the current year.
E)none of the above

Question

Quizplus · Accepted Answer

Since the sale was not recorded, the accounts receivable (an asset) that should have increased did not, while inventory was correctly reduced. This leads to an understatement of total assets due to the missing accounts receivable entry.

Roseland Company Uses the Periodic Method of Accounting for Inventory