If undetected, what is the effect of this error on Berkshire's 12/31/2012 balance sheet?
A)Assets understated by $600,000 and shareholders' equity understated by $600,000.
B)Assets understated by $420,000 and shareholders' equity understated by $420,000.
C)Assets understated by $600,000, liabilities understated by $180,000, and shareholders' equity understated by $420,000.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

If assets are understated by $600,000 and liabilities are understated by $180,000, the net effect on shareholders' equity would be an understatement of $420,000.

If Undetected, What Is the Effect of This Error on Berkshire's