Which of the following is correct?
A) Failure to report a gain on the sale of an asset results in an overstatement of net income.
B) Failure to report a gain on the sale of an asset results in an understatement of stockholders' equity.
C)Failure to report a loss on the sale of an asset results in an understatement of net income.
D)Failure to report a loss on the sale of an asset results in an understatement of earnings per share.

Question

Quizplus · Accepted Answer

Failure to report a gain on the sale of an asset results in an understatement of stockholders' equity because the gain increases retained earnings, a component of equity.

Which of the Following Is Correct