If Undetected, What Is the Effect of This Error on Berkshire's

question 111

Multiple Choice

If undetected, what is the effect of this error on Berkshire's 12/31/08 balance sheet?

• A)Assets understated by $600,000 and shareholders' equity understated by $600,000.
• B)Assets understated by $420,000 and shareholders' equity understated by $420,000.
• C)Assets understated by $600,000, liabilities understated by $180,000 and shareholders' equity understated by $420,000.
• D)None of these is correct.

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Definitions:

Collateral

Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender if the borrower fails to make payments.

Creditor

An individual or organization to whom money is owed by a debtor.

Co-Sign

To sign a legal document alongside another person, often agreeing to take responsibility if the primary signer fails to meet the terms.

Credit Application

A form or request submitted by an individual or business seeking to obtain credit from a lending institution.