During its December 31, 2017 year-end inventory count, Jefferson Company failed to count items in transit to which it had legal title. As a result of this error, ending inventory was understated by $30,000. Assuming the company makes no errors in 2018, Jefferson's owner's equity at the end of December 2018 will be

Question

Quizplus · Accepted Answer

The error in 2017 caused an understatement of ending inventory, which understated assets and equity. However, in 2018, the beginning inventory would be understated, leading to an understatement of cost of goods sold and an overstatement of net income, correcting the equity by the end of 2018.

During Its December 31, 2017 Year-End Inventory Count, Jefferson Company