Ronn Industries Ronn Industries Reported Net Income of $95,000 for 2012. Early

question 28

Multiple Choice

Ronn Industries
Ronn Industries reported net income of $95,000 for 2012. Early in 2013, Ronn discovered that its 2012 ending inventory was overstated by $5,000.
-
Refer to the information provided for Ronn Industries. Determine the financial statement effects of the inventory error for 2013.

• A) Expenses will be understated and net income will be overstated.
• B) Expenses will be overstated and net income will be understated.
• C) Both expenses and net income will be overstated.
• D) Both expenses and net income will be understated.

---

Definitions:

Lessee

A lessee is an individual or entity that leases an asset from another party, known as the lessor.

Lease Contract

is an agreement wherein one party allows another to use an asset, such as property or equipment, for a specified period in exchange for payment.

Banker

A professional in the banking industry who deals with the management, operation, and provision of banking services to consumers and businesses.

Contra Asset Account

This is an account used in financial accounting to offset the balance of a related asset account, increasing the overall accuracy of the company's financial statement.