Question

X Company prepares monthly financial statements. In January, it purchased inventory on account. The accountant recorded...

X Company prepares monthly financial statements. In January, it purchased inventory on account. The accountant recorded the transaction as an increase in Inventories and an increase in Retained Earnings. As a result, which of the following is true regarding the January financial statements?

Retained Earnings was understated.
Revenue was understated.
Accounts Payable was understated.
Expenses were understated.
Accounts Receivable was overstated.
Inventories were understated.

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