A Company Failed to Record an Acquisition of Merchandise and Its

Multiple Choice

A company failed to record an acquisition of merchandise and its attendant liability, but it was included in the physical count of ending inventory. The effect on the financial statements would be to:

A) overstate net income and owners' equity.
B) understate both assets and liabilities.
C) understate liabilities and overstate both net income and owners' equity.
D) understate assets and owners' equity.