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Question
During the taking of its physical inventory on December 31, Barry’s Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be
a. assets overstated by $70,000; retained earnings understated by $70,000; and net income statement understated by $70,000
b. assets overstated by $70,000; retained earnings understated by $70,000; and no effect on the income statement
c. assets, retained earnings, and net income all overstated by $70,000
d. assets and retained earnings overstated by $70,000 and net income understated by $70,000
Answer
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