An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result
A) is an understatement of net earnings.
B) is an overstatement of net earnings.
C) is an overstatement of working capital.
D) is an overstatement of owner's equity.

Question

Quizplus · Accepted Answer

Since the acquisition is not included in inventory, the ending inventory will be understated, thereby leading to an understatement of cost of goods sold and an overstatement of net earnings. This, in turn, leads to an overstatement of working capital and owner's equity.

An Inventory Acquisition Is Received Late in the Afternoon of December