If a manufacturer ships merchandise to a retailer on consignment

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the

	a.	shipper
	b.	consignee
	c.	retailer
	d.	manufacturer

Answer = d

If a company mistakenly counts less items during a physical inventory than actually exist, how will the error affect the cost of merchandise sold?

	a.	Understated
	b.	Overstated
	c.	no change
	d.	only inventory will be affected

Answer = b

During the taking of its physical inventory on December 31, 2014, Barry’s Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000.   The effect on the balance sheet and income statement would be

	a.	assets and retained earnings overstated by $70,000; and net income understated by $70,000
	b.	assets overstated by $70,000; retained earnings understated by $70,000;  and net income statement understated by $70,000
	c.	assets overstated by $70,000; retained earnings understated by $70,000;  and no effect on the income statement
	d.	assets, retained earnings, and net income all overstated by $70,000

Answer = d