what is the effect of droit rsquo s inability to determine beginning supplies invent 603342
Before 2006, Droit Co. used the cash basis of accounting. As of December 31, 2006, Droit changed to the accrual basis. Droit cannot determine the beginning balance of supplies inventory. What is the effect of Droit’s inability to determine beginning supplies inventory on its 2006 accrual-basis net income and December 31, 2006 accrual-basis owners’ equity?
align=”left”>
|
2006 net income |
12/31/06 owners’ equity |
|
|
a. |
No effect |
No effect |
|
b. |
No effect |
Overstated |
|
c. |
Overstated |
No effect |
|
d. |
Overstated |
Overstated |