Tasty Food, Inc.'s statements have overstated accounts payable by 400 and understated the accounts receivables by 225. Then, which of the following is/are true?
I. Its income is correctly stated.
II. Its income is overstated by 175.
III. Its current assets are overstated by 225.
IV. Its operating cash flows are overstated by 175.
Click on the arrows to vote for the correct answer
A. B. C. D.C
Current assets are understated by 225. The reported income is not affected since the errors are in the balance sheet items. The operating cash flow is overstated by 400-225=175. Note that current liability is overstated by 400.