Question

Ballou Corporation declared a cash dividend on December 13, 2018, payable on January 10, 2019. By mistake, the company failed to make a journal entry in December 2018. The effect of this error on the financial statements as of December 31, 2018 were:_____.
a. retained earnings was overstated and liabilities were understated.
b. retained earnings was overstated and cash were understated.
c. retained earnings and liabilities were both understated.
d. retained earnings and liabilities were both overstated.

Answer 1

Answer:

a. retained earnings was overstated and liabilities were understated.

Explanation:

Since in the cash dividend is declared also the same is not recorded by the company

So this error would impact the two account i.e. retained earnings and the liabilities

In this, the retained earning is overstated and the liabilities were understated

Therefore the correct option is a.

And, the rest of the options are wrong