Berkshire Inc

question 148

Multiple Choice

Berkshire Inc. uses a periodic inventory system. At the end of 2017, it missed counting some inventory items, resulting in an inventory understatement by $600,000. Assume that Berkshire has a 30% income tax rate and that this was the only error it made.
-What is the effect of the error on Berkshire's December 31,2018 balance sheet?

• A) There are no errors in the December 31,2018 balance sheet.
• B) Assets understated by $600,000 and shareholders' equity understated by $600,000.
• C) Assets understated by $420,000 and shareholders' equity understated by $420,000.
• D) Liabilities understated by $180,000 and shareholders' equity overstated by $420,000.

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Definitions:

Collective Learning

The process through which a group, organization, or society accumulates knowledge and skills from shared experiences over time.

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Research conducted in natural settings to investigate the applicability of theoretical findings to real-world situations.

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