A Company Using the Periodic Inventory System Correctly Recorded a Purchase

question 16

Multiple Choice

A company using the periodic inventory system correctly recorded a purchase of merchandise,but the merchandise was not included in the physical inventory count at the end of the accounting period.The error caused which of the following?

• A)An understatement of both net income and inventory.
• B)An overstatement of inventory,purchases,and accounts payable.
• C)An understatement of inventory,purchases,and accounts payable.
• D)An overstatement of net income and inventory.

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Definitions:

Analytical Methods

Techniques and procedures used to break down complex material or data into simpler parts to understand it better or reach conclusions.

Cash Flows

The full measure of financial transactions entering and leaving a business, essentially shaping its liquidity factor.

Discounted Cash Flow

An investment appraisal technique that values a project or an asset based on the present value of its expected future cash flows.

Valuation

The process of determining the present value of an asset or a company based on earnings, assets, and market comparisons.