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fredd [130]
2 years ago
8

Kelton Inc. purchases inventory for $2,000 and incurs shipping costs of $100. To record this transaction, the company debits Inv

entory for $2,000, debits Selling Expenses for $100, and credits Cash for $2,100. Which of the following statements is correct?A. Revenues are understated.
B. Net income is overstated.
C. Assets are understated.
D. All accounts are accurately stated.
Business
1 answer:
prisoha [69]2 years ago
8 0

Answer:

C. Assets are understated

Explanation:

In terms of IAS 2, Inventory cost include, the <em>purchase cost</em> , <em>conversion cost</em> and all <em>other costs directly related</em> to bringing the inventory in the correct location and condition intended for sale by the company.

The Company has not included <em>shipping costs</em> of $100 to inventory cost, hence inventory is understated and consequently this overstates the <em>cost of goods sold</em> and understate the Inventory , gross profit and net income by $100

Selling Expenses have been accounted for in error, therefore<em> Operating Expenses</em> are Overstated and <em>Net Income</em> understated by $100

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2 years ago
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3 years ago
As of January 1, Year 2, Room Designs Inc. had a balance of $9,900 in Cash, $3,500 in Common Stock, and $6,400 in Retained Earni
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