During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $210,306 instead of the correct amount of $175,452. The effect on the balance sheet and income statement would be Oa, assets overstated by S34,854; retained earnings understated by $34,854; and net income statement understated by $34,854 Ob. assets overstated by S34,854; retained earnings understated by S34,854; and no effect on the income statement Oc. assets, retained earnings, and net income all overstated by $34,854 Od. assets and retained earnings overstated by $34,854; and net income understated by S34,854

During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $210,306 instead of the correct amount of $175,452. The effect on the balance sheet and income statement would be Oa, assets overstated by S34,854; retained earnings understated by $34,854; and net income statement understated by $34,854 Ob. assets overstated by S34,854; retained earnings understated by S34,854; and no effect on the income statement Oc. assets, retained earnings, and net income all overstated by $34,854 Od. assets and retained earnings overstated by $34,854; and net income understated by S34,854

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Description: During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $210,306 instead ofthe correct amount of $175,452. The effect on the balance sheet and income statement would beOa, assets overs

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $210,306 instead of
the correct amount of $175,452. The effect on the balance sheet and income statement would be
Oa, assets overstated by S34,854; retained earnings understated by $34,854; and net income statement understated by $34,854
Ob. assets overstated by S34,854; retained earnings understated by S34,854; and no effect on the income statement
Oc. assets, retained earnings, and net income all overstated by $34,854
Od. assets and retained earnings overstated by $34,854; and net income understated by S34,854
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