Answer: d.Assets are understated by $9,000.
Explanation:
When Assets are recorded at a lower amount than they actually are, they are UNDERSTATED.
This means that their value is not adequately represented and is higher than the recorded amount as opposed to OVERSTATED where the asset is recorded at an amount OVER the value of the Asset.
The company recorded the assets at a value $9,000 less than its value so it is understated by that amount.
Answer:
d.Assets are understated by $9,000.
Explanation:
When year end inventory is understated, the cost of goods sold in the year is overstated and as such, the net income is understated. This invariably results in an understatement of the owners equity as the retained earnings which is a component of the owners equity will be understated.
Inventory balance forms part of the asset balance hence where inventory is understated , the assets value will be understated as well.
The understatement in value is
= $43,000 - $34,000
= $9,000
