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d. as an addition in the cost of goods sold section of the income
statement and as a current asset on the balance sheet.
P40. If the beginning inventory for 2012 is overstated, the effects of
this error on cost of goods sold for 2012, net income for 2012, and
assets at December 31, 2013, respectively, are
a. overstatement, understatement, overstatement.
b. overstatement, understatement, no effect.
c. understatement, overstatement, overstatement.
d. understatement, overstatement, no effect.
S41. The failure to record a purchase of mer-chandise on account
even though the goods are properly included in the physical
inven-tory results in
a. an overstatement of assets and net income.
b. an understatement of assets and net income.
c. an understatement of cost of goods sold and liabilities and an
overstatement of assets.
d. an understatement of liabilities and an overstatement of owners'
equity.
42. Dolan Co. received merchandise on consignment. As of March
31, Dolan had recorded the transaction as a purchase and included
the goods in inventory. The effect of this on its financial statements for
March 31 would be