The December 31, 2016, Ending Inventory Failed to Include $25,000

question 114

Multiple Choice

The December 31, 2016, ending inventory failed to include $25,000 of inventory that was received on December 27,
2016. The purchase on account was, however, properly recorded on the date of delivery. What effect will this error have on the December 31, 2016, assets, liabilities, and net income for the year then ended? $$\begin{array} { l l l l } & \text { Assets } & \text { Liabilities } & \text { NetIncome } \\\hline\text { I. } & \text { overstated } & \text { overstated } & \text { no effect II. } \\& \text { understated } & \text { understated } & \text { no effect } \\\text { III. } & \text { understated } & \text { no effect } & \text { understated } \\\text { IV } & \text { understated } & \text { understated } & \text { understated }\end{array}$$

• A) I
• B) II
• C) III
• D) IV

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Definitions:

Vocational Off-highway

Pertaining to specialized vehicles used in industries such as construction, mining, and agriculture that operate primarily off public roads.

Linehaul Trucking

The transportation of goods over long distances, typically between cities or major ports, using large trucks.

Less-than-load

A shipping term that refers to cargo that does not require the full space of a truck or shipping container, often abbreviated as LTL.

Broken Back

A term sometimes used in medical or veterinary contexts to describe a fracture or series of fractures along the spine.