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What is the effect of the error on oltens december

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Olten Inc. uses a periodic inventory system. At the end of 2020, it missed counting some inventory items, resulting in an inventory understatement by $600,000. Assume that Olten has a 25% income tax rate and that this was the only error it made.

Question 1: What is the effect of the error on Olten's December 31, 2021 balance sheet?

Group of answer choices

A. There are no errors in the December 31, 2021 balance sheet.

B. Assets understated by $450,000 and shareholders' equity understated by $450,000.

C. Liabilities understated by $150,000 and shareholders' equity overstated by $450,000.

Reference no: EM132513952

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