Adjusting financial statements for excluded purchase

Steps:

• Identify excluded item: $300 goods delivered on 31 March, not in reported inventory or payables.
• Add to inventory: Goods received increase closing inventory by $300 to$16,400.
• Add to trade payables: Corresponding liability for purchase increases trade payables by $300 to$500.
• Include other payables: Add excluded $200 other payables to total liabilities.
• Compute net adjustment: Current assets rise by $300; current liabilities rise by$500 (trade) + $200 (other) =$700.

Why D is correct:

• D adjusts both inventory and payables per accrual accounting principle, recognizing delivery on balance sheet date.

Why the others are wrong:

• A ignores purchase entirely, violating accrual basis.
• B adds only to inventory, omitting liability recognition.
• C adds only to payables, understating assets.

Final answer: D