Othello Company Understated Its Inventory by $20,000 at December 31

question 143

Multiple Choice

Othello Company understated its inventory by $20,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Othello's stockholder's equity was:

• A)understated at December 31, 2014, and overstated at December 31, 2015.
• B)understated at December 31, 2014, and properly stated at December 31, 2015.
• C)overstated at December 31, 2014, and overstated at December 31, 2015.
• D)understated at December 31, 2014, and understated at December 31, 2015.

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Definitions:

Fair Values

An estimate of the market value of an asset or liability, based on assumptions of what market participants would use in an orderly transaction at the measurement date.

Common Stock

A type of equity security that represents ownership in a corporation, providing rights to vote on corporate matters and receive dividends.

Acquisition

Acquisition involves purchasing all or a substantial portion of the assets or ownership stakes of a company, effectively bringing it under the control of the acquiring entity.

Consolidated Common Stock

Represents the aggregation of common stock of a parent company and its subsidiaries, shown in the consolidated financial statements.