Question: The December 3 1 , 2 0 2 0 , ending inventory failed to include $ 2 5 , 0 0 0 of inventory that

The December

31, 2020,

ending inventory failed to include $

25, 000

of inventory that was received on December

27, 2020 .

The purchase on account was, however, properly recorded on the date of delivery. What effect will this error have on the December

31, 2020,

assets, liabilities, and net income for the year then ended?

AssetsLiabilitiesNet IncomeI.overstatedoverstatedno effectII.understatedunderstatedno effectIII.understatedno effectunderstatedIV.understatedunderstatedunderstated

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