Dolan Co. received merchandise on consignment. As of March 31, Dolan had recorded the transaction as a purchase and included the goods in inventory. The effect of this on its financial statements for March 31 would be
A) no effect.
B) net income was correct and current assets and current liabilities were overstated.
C) net income, current assets, and current liabilities were overstated.
D) net income and current liabilities were overstated.

Question

Quizplus · Accepted Answer

Net income was correct because the sale of the goods was not recorded. Current assets and current liabilities were overstated because the goods were included in inventory, which is a current asset, and the liability to the consignor was not recorded.

Dolan Co Received Merchandise on Consignment