The Accountant for the Iris Company Did Not Record a Purchase

question 100

Multiple Choice

The accountant for the Iris Company did not record a purchase of merchandise on credit for the current year, but the merchandise was correctly included in the ending inventory.Assuming a periodic inventory system, how would assets, liabilities, and retained earnings be affected on the year-end balance sheet? $\begin{array}{lll}&\text {Asssets }&\text { Liabilities}&\text { Retained Earming}\\\hlineI.&\text { No effect } & \text { Understated } & \text { Understated } \\II.&\text { Undlerstated } & \text { Understated } & \text { No effect } \\III.&\text { No effect } & \text { No effect } & \text { Overstated }\\IV.&\text { No effect } & \text { Understated } & \text { Overstated }\\\end{array}$

• A)I
• B)II
• C)III
• D)IV