Answer:
a)Corrected net income= $97,000
b) Total assets figure is understated.
Explanation:
To arrive at the net income, cost of goods sold is usually deducted from the sales revenue. An cost of sold is determined by subtracting the value of inventory. So an understated inventory would mean an overstated cost of goods sold and understated net income
Correct net income = 90,000 + 7,000
= $97,000
Inventory is part of current assets s reported in the balance sheet . Therefore, if inventory is understated it implies that the current assets figure is understated and therefore the total assets figure is understated.
