Question

"Kilian Company's inventory balance at the end of the current year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered, the effect of this error on financial statements in the following year will be___________.

Answer 1

Answer:

understated assets, retained earnings, and net income

Explanation:

As in the given case, the inventory balance at the end of the year does include the $10,000 of inventory plus it also excluded from the physical count

So, if the error is not found, the effect of this error is assets are understated instead of overstated which results the retained earnings and the net income understated