A $25,000 Overstatement of the 2018 Ending Inventory Was Discovered

question 48

Multiple Choice

A $25,000 overstatement of the 2018 ending inventory was discovered after the financial statements for 2018 were prepared.Which of the following describes the effect of the inventory error on the 2019 financial statements?

• A)Net income and stockholders' equity are both understated.
• B)Net income is understated and stockholders' equity is correct.
• C)Net income and stockholders' equity are both overstated.
• D)Net income and stockholders' equity are both unaffected.

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Definitions:

Economic Growth

An increase in the production of goods and services in an economy over a period, often measured by the rise in the gross domestic product (GDP).

Corruption

The abuse of entrusted power for private gain, which can occur in both the public and private sectors.

Poor Administration

Inefficient or ineffective management practices within an organization or government, often leading to suboptimal results, waste, or failure to meet objectives.

Nationalization

The process by which a government takes ownership and control of private assets or industries, often to ensure public access or control.