Green Co. received merchandise on consignment. As of January 31, Green included the goods in inventory, but did not record the transaction. The effect of this on its financial statements for January 31 would be:a. net income, current assets, and retained earnings were overstated.b. net income was correct and current assets were understated.c. net income and current assets were overstated and current liabilities were understated.d. net income, current assets, and retained earnings were understated.

Respuesta :

Answer:

The correct answer is a. net income, current assets, and retained earnings were overstated.

Explanation:

The consignment contract is a commercial contract, which is that a person is obliged to sell the goods of another, after setting a price that the consignee must deliver to the consignor.

The consignee has the right to sell the merchandise for a greater value, and that greater value will be his. The consignee may limit the consignee to only sell the merchandise at a specified value, but in any case, the consignee is entitled to the payment of a collision previously established in the respective consignment contract.

The consignee is responsible for the merchandise due to minor fault, but not for force majeure. The consignee is not responsible for the loss or deterioration due to the nature of the merchandise itself, but must respond if the deterioration or damage is the result of negligence or unforeseen.