In 2017, Antiques, Inc B) C) D)

question 63

Multiple Choice

In 2017, Antiques, Inc. incorrectly recorded ending inventory as $1,030,000 instead of $790,000. The controller discovered the error in 2019 when reviewing final entries for 2018 financial statements. The books are not closed in 2018. The 2018 ending inventory amount was correct. The tax rate for all years is 35%. Which one of the following entries is correctly written and dated?

• A) \[\begin{array} { | l | r | r | }
• \hline \text { December } 31,2017 & & \\
• \hline \text { Retained Earnings-Prior Period Adj. } & 156,000 & \\
• \hline \text { Income Tax Receivable } & 84,000 & \\
• \hline \text { Inventory } & & 240,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { December } 31,2018 & & \\
• \hline \text { Inventory } & 240,000 & \\
• \hline \text { Income Tax Payable } & & 84,000 \\
• \hline \text { Retained Earnings-Prior Period Adj. } & & 156,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Ianuary } 1,2019 & & \\
• \hline \text { Inventory } & 240,000 & \\
• \hline \text { Income Tax Payable } & & 84,000 \\
• \hline \text { Retained Earnings-Prior Period Adj. } & & 156,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { December } 31,2018 & & \\
• \hline \text { Retained Earnings-Prior Period Adj. } & 156,000 & \\
• \hline \text { Income Tax Receivable } & 84,000 & \\
• \hline \text { Inventory } & & 240,000 \\
• \hline
• \end{array}\]

---

Definitions:

Good Faith

An honest intention to act without taking an unfair advantage over another party, often emphasized in contractual and negotiation contexts.

Imputed Knowledge

Information or knowledge attributed to a person, typically within a legal context, even if they were not directly aware of it.

Material Information

Information that would influence the decision-making process of a reasonable person or investor in determining a course of action.

Partnership Affairs

Refers to the internal business activities, decisions, and operations managed collectively by partners within a business partnership.