On December 15,20A,Toby Company accepted delivery of merchandise which it purchased on credit.As of December 31,20A,the company had neither recorded the transaction nor included the merchandise in its inventory because the seller's invoice had not been received.The effect of this omission on its statement of financial position at December 31,20A,(end of the accounting period)was which of the following?
A)Assets and shareholders' equity were overstated but liabilities were not affected.
B)Shareholder's equity was the only item affected by the omission.
C)Assets and liabilities were understated but shareholders' equity was not affected.
D)Assets and shareholders' equity were understated but liabilities were not affected.

Question

Quizplus · Accepted Answer

The omission resulted in both assets (inventory) and liabilities (accounts payable) being understated, but shareholders' equity was not affected because the transaction was not recorded.

On December 15,20A,Toby Company Accepted Delivery of Merchandise Which It