On December 30, Kessler Co. accepted delivery of merchandise which it purchased on account. As of December 31, Kessler had recorded the purchase, but did not include the merchandise in its physical count of ending inventory. The effect of this on its financial statements for December 31 would be:

Question

Business

Abbie Knox

16 December, 02:20

On December 30, Kessler Co. accepted delivery of merchandise which it purchased on account. As of December 31, Kessler had recorded the purchase, but did not include the merchandise in its physical count of ending inventory. The effect of this on its financial statements for December 31 would be:

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Ariel Huerta · Answer 1

net income, current assets, and retained earnings to be understated.

Explanation:

Based on the information provided it can be said that by not including the merchandise in it's physical count of ending inventory it would cause the net income, current assets, and retained earnings to be understated. This is because the merchandise (being a physical asset) not being added to the inventory would cause the amount of current assets to be lower than the actual amount, also since each unit has a price it affects the income and retained earnings in the final financial statement.