A company forgets to record a purchase on credit in the Purchases account, but ending inventory is correct. The effect of this mistake in the current year is:
|
Income |
Cost of goods sold |
Accounts payable |
Retained earnings |
|
a. Overstated |
Understated |
Understated |
Overstated |
|
b. Understated |
Overstated |
Overstated |
Understated |
|
c. Overstated |
Understated |
Overstated |
Understated |
|
d. Understated |
Overstated |
Understated |
Overstated |