Explain how the would overstatement of inventory affect assets?

This
week the course designers gave us one big question to answer. It’s
easier to answer,
however, as a whole bunch of easy little questions. This week,
fortunately, we don’t need any financial statements or web links to
answer the easy little questions.

To make sure you’ve answered each question and that I can quickly see that you’ve answered
each question, please label (number
and letter) your
answers as follows. I recommend that you just
copy the questions and paste them into your answer and use them to make sure you’ve answered each little piece of this
week’s discussion question:

1a. How
would the overstatement of inventory affect assets? (Which specific asset
would it affect and in which direction?)

1b. How
would the understatement of inventory affect assets? (Which specific asset
would it affect and in which direction?)

2a.
How would the overstatement of inventory affect liabilities?

2b. How
would the understatement of inventory affect liabilities?

3a.
How would the overstatement of inventory affect a permanent owner’s equity account? (Which specific owner’s
equity account would it affect and in which direction?)

3b. How
would the understatement of inventory affect a permanent owner’s equity account? (Which specific owner’s
equity account would it affect and in which direction?)

Hint: For
each question be sure to say whether the inventory error (overstatement or understatement) would increase or decrease the
accounting element, or have no
impact at
all. If the error would increase or decrease the element, be sure to say which
specific account the
error increases or decreases. For Question 1a,
for instance, you might say something like, “An overstatement of
inventory increases assets, specifically the Merchandise Inventory
account.”
Luannn
2 minutes ago
Hint 1: For
each question be sure to say whether the inventory error (overstatement or understatement) would increase or decrease the
accounting element, or have no impact at all. If the error would increase or decrease the element, be sure to say which
specific account the error increases or decreases. For Question 1a,
for instance, you might say something like, “An overstatement of
inventory increases assets, specifically the Merchandise Inventory
account.” 😀

The accounting elements are assets, liabilities and stockholders’
equity.

Hint 2: Chapter
6, on page 6-16, has Illustration 6.18, which directly addresses our
discussion question and actually contains the answers to two of our
questions outright. 🙂 Good luck!

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