Answer
Clarkson Company’s net income will not be impacted due to the omission. Regarding the statement of financial position, Clarkson Company’s inventory and accounts payable will be understated by \$214,000. Furthermore, the company’s current ratio will be overstated. Materiality is crucial when resolving whether to adjust or not to adjust for the item. Still, even if the amount were non-material, it should be included in Clarkson Company’s books since it aligns with the ideal of faithful representation.
Work Step by Step
Clarkson Company’s net income will not be impacted due to the omission. Regarding the statement of financial position, Clarkson Company’s inventory and accounts payable will be understated by \$214,000. Furthermore, the company’s current ratio will be overstated. Materiality is crucial when resolving whether to adjust or not to adjust for the item. Still, even if the amount were non-material, it should be included in Clarkson Company’s books since it aligns with the ideal of faithful representation.
