During the Taking of Its Physical Inventory on December 31

question 59

Multiple Choice

During the taking of its physical inventory on December 31, 2010, Barry's Bike Shop incorrectly counted its inventory as $270,000 instead of the correct amount of $190,000. The effect on the balance sheet and income statement would be as follows:

• A) assets overstated by $80,000; retained earnings understated by $80,000; net income statement understated by $80,000.
• B) assets overstated by $80,000; retained earnings understated by $80,000; no effect on the income statement.
• C) assets and retained earnings overstated by $80,000; net income overstated by $80,000.
• D) assets and retained earnings overstated by $80,000; net income understated by $80,000.

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Definitions:

Common Resource

A resource that is nonexcludable and rival in consumption.

Super Bowl

The annual championship game of the National Football League (NFL), watched by millions worldwide.

Public Park

An area of natural, semi-natural, or planted space set aside for human enjoyment and recreation or for the protection of wildlife or natural habitats.

Nonexcludable

Referring to a good, describes the case in which the supplier cannot prevent those who do not pay from consuming the good.