Hollander Company Hired Some Students to Help Count Inventory During

question 26

Multiple Choice

Hollander Company hired some students to help count inventory during their semester break.Unfortunately,the students added incorrectly and the 2019 ending inventory was overstated by $5,000.What would be the effect of this error in ending inventory?

• A)2019 net income would be overstated.
• B)2019 net income would be understated.
• C)2019 ending retained earnings would be understated.
• D)2019 cost of goods sold would be overstated.

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Definitions:

Chequing Account

A type of bank account that offers easy access to funds for daily transactions, allowing for deposits, withdrawals, and cheque payments.

Cheque

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer or a named party.

Safety Stock

Extra inventory maintained to guard against stockouts due to variance in supply or demand.

Inventory Level

The quantity of goods and materials on hand and available for sale or use by a business at any given time.