Atomic Company did not record a December 2013 purchase of inventory on credit until January 2014. Assuming that the December 31, 2013 ending inventory was correctly determined, what is the effect of this error on the financial statements for the year ended December 31, 2013?
A) Net income is correct.
B) Stockholders' equity is understated.
C)Net income is overstated.
D)Current assets are understateD.The 2013 purchases are understated, which causes cost of goods sold to be understated and net income to be overstated.

Question

Quizplus · Accepted Answer

The error of not recording the purchase of inventory in December 2013 will cause the cost of goods sold to be understated, leading to an overstatement of net income for the year ended December 31, 2013. As a result, the financial statements will be misstated, and net income will be overstated.

Atomic Company Did Not Record a December 2013 Purchase of Inventory