Use the following information for question 102-103.
During its December 31, 2014 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 2015, Jefferson's owner's equity at the end of December 2015 will be
A) overstated by $30,000.
B) understated by $30,000.
C) overstated by $60,000.
D) correct.

Question

Quizplus · Accepted Answer

The error in 2014's ending inventory would initially understate both the 2014 ending inventory and the 2015 beginning inventory by $30,000. However, when the items are included in the 2015 ending inventory, the error is corrected. Thus, by the end of 2015, the owner's equity will be correctly stated, assuming no other errors occur.

Use the Following Information for Question 102-103