Wilma Received Merchandise on Consignment from Bubbles

question 205

Multiple Choice

Wilma received merchandise on consignment from Bubbles.As of January 31, Wilma included the goods in inventory, but did not record the transaction.The effect of this on Wilma's financial statements for January 31 would be

• A)net income, current assets, and retained earnings were understated.
• B)net income was correct and current assets were understated.
• C)net income, current assets, and retained earnings were overstated.
• D)net income and current assets were overstated and current liabilities were understated.

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Definitions:

CCA Class

A category under the Canadian tax system that determines the depreciation rate for tax purposes on capital assets.

Net Advantage

The benefit or gain that results from a specific course of action, minus any associated costs.

Resale Value

The estimated value for which an asset can be sold in the marketplace after some period of use.

Depreciation Tax Shield

A reduction in taxable income for firms, achieved through claiming depreciation expenses, thereby lowering the tax liability.