Atomic Company Did Not Record a December 2016 Purchase of Inventory

question 130

Multiple Choice

Atomic Company did not record a December 2016 purchase of inventory on credit until January 2017. Assume that the December 31, 2016 ending inventory was correctly determined. What is the effect of this error on the financial statements for the year ended December 31, 2016?

• A)Net income is correct.
• B)Stockholders' equity is understated.
• C)Net income is overstated.
• D)Current assets are understateD.The 2016 purchases are understated, which causes cost of goods sold to be understated and net income to be overstated in 2016.

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Definitions:

Dividend Yield

The ratio of a company's annual dividends to its current share price, represented as a percentage.