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, 2014?
A) Net income is correct.
B) Stockholders' equity is correct.
C)Net income is overstated.
D)Stockholders' equity is overstateD.Inventory related errors including purchase cutoff errors are self-correcting on the balance sheet after two periods.

Question

Quizplus · Accepted Answer

The Answer of 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, 2014?
A) Net income is correct.
B) Stockholders' equity is correct.
C)Net income is overstated.
D)Stockholders' equity is overstateD.Inventory related errors including purchase cutoff errors are self-correcting on the balance sheet after two periods.

Atomic Company Did Not Record a December 2013 Purchase of Inventory