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Madison Winslow
on Dec 16, 2024

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Cesar Company understated its inventory by $20000 at December 31 2016. It did not correct the error in 2016 or 2017. As a result Cesar's owner's equity was:

A) understated at December 31 2016 and overstated at December 31 2017.
B) understated at December 31 2016 and properly stated at December 31 2017.
C) overstated at December 31 2016 and overstated at December 31 2017.
D) understated at December 31 2016 and understated at December 31 2017.

Inventory Understatement

Inventory understatement occurs when the reported amount of inventory is less than the actual amount, which can lead to inaccurately high cost of goods sold and lower net income.

Owner's Equity

The residual interest in the assets of a business after deducting liabilities, representing the owners' claim against the company’s assets.

Error Correction

A process in accounting used to rectify inaccuracies or mistakes in financial records and statements.

  • Appreciate the consequences of inventory miscalculations on financial documentation.
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HS
Hunter SteinmillerDec 21, 2024
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