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Question(s) / Instruction(s):

A company using a perpetual inventory system neglected to record a purchase of merchandise on account at year end. This merchandise was omitted from the year-end physical count. How will these errors affect assets, liabilities, and stockholders\' equity at year end and net income for the year?

       Assets            Liabilities            Stockholders\' Equity      Net Income

a.   No affect           Overstate                Understate                    Understate

b.   Understate        No effect                 Understate                     Understate

c.    No affect         Understate               Overstate                       Overstate

d.    Understate       Understate                No effect                       No effect

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