On December 15, 2013, a corporation accepted delivery of goods for resale which it purchased on credit. As of December 31, the company had not recorded the transaction or included the merchandise in its inventory. The effect of this on the balance sheet for December 31, 2013 would be:
A) assets and liabilities were understated but stockholders' equity was not affected.
B) assets and stockholders' equity were understated but liabilities were not affected.
C) assets and stockholders' equity were overstated but liabilities were not affected.
D) stockholders' equity was the only item affected by the omission.

Question

Quizplus · Accepted Answer

Since the corporation has not recorded the transaction or included the merchandise in its inventory, both assets and liabilities are understated. However, stockholders' equity is not affected since the transaction has not been recorded.

On December 15, 2013, a Corporation Accepted Delivery of Goods